Total Sales Growth with Acquisition and Currency Support
Reported first quarter sales of $540 million, up 2% year-over-year; growth composition: acquisitions +5%, currency translation +3%, offset by organic sales -6%.
April 22nd, 2026
Summary
- Earnings Call Date:
- 2026-04-22
- Change Since:
- -12.33%
- Next Earnings Date:
- 2026-07-29
Earnings Call Sentiment
NeutralThe call presented a mix of positive operational indicators (bookings growth, backlog expansion, strong semiconductor bookings, maintained full-year guidance, healthy cash generation and an active M&A pipeline) alongside material near-term headwinds (6% organic revenue decline, EPS down 6%, gross margin compression, tariff-related costs and a slow start with timing-related backlog conversion). Management emphasized confidence in demand momentum, backlog conversion and disciplined capital allocation, but underlying organic weakness—especially in contractor/construction end markets—and margin pressure temper the tone.
Company Guidance
Management reaffirmed 2026 revenue guidance of low‑single‑digit organic growth (constant currency) and mid‑single‑digit growth including acquisitions, and said current exchange rates (assuming similar volume/mix) should be ~+1% to net sales and ~+2% to net earnings; they expect a full‑year adjusted effective tax rate of ~20–21%, unallocated corporate expenses of $40–$43M, and capital expenditures of $90–$100M (about $50M for facility expansions). On the Q1 results they reported sales of $540M (+2% y/y: acquisitions +5%, FX +3%, organic −6%), reported net earnings $119M (−5%, $0.70/sh) and adjusted EPS $0.66 (−6%), gross margin down 60 bps, tariffs added ~$7M of product cost, cash from operations $120M (down $5M; 107% of adjusted net earnings), and YTD uses including 189k shares repurchased for $16M, dividends $49M, capex $12M and $40M of share issuances. Bookings were up (overall +3% at actual rates; Industrial bookings +5%) driving roughly $26M of backlog growth in Q1 (≈$23M in Industrial) plus another ~$21M backlog build post‑quarter; Q1 operating margin rates were Contractor & Expansion 24%, Industrial 32%, and total operating earnings 26% (vs 27% prior); 2027 will be a 53‑week year (extra week in Q4).
Strong Bookings and Backlog Expansion
Bookings up ~3% at actual currency rates during the quarter, driving a nearly $26 million increase in backlog (primarily Industrial); an additional ~$21 million backlog build occurred subsequent to quarter end.
Industrial Booking Momentum
Industrial bookings up mid-single digits and backlog increased by ~$23 million; Industrial sales increased 4% (acquisitions +8%, currency +4%, organic -8%), indicating demand recovery potential.
Semiconductor and Expansion Markets Recovery Signals
Although Expansion Markets organic revenue declined 5% versus an exceptionally strong prior year, semiconductor bookings were up at least 20% in each region and environmental business activity improved with bookings trending positive year-to-date.
Maintained Full-Year Guidance
Management maintained 2026 outlook: low single-digit organic revenue growth on a constant currency basis and mid-single-digit growth including acquisitions, citing improving order trends and stronger second-half comparisons.
Solid Cash Generation and Capital Allocation
Cash provided by operations $120 million (down 4% YoY) and cash provided as a percentage of adjusted net earnings was 107% for the quarter; year-to-date capital uses included $16M of buybacks (189,000 shares), $49M dividends and $12M capex, partially offset by $40M share issuances.
Disciplined Capital Deployment and Active M&A Pipeline
Company reiterated capital allocation discipline: continued dividends, opportunistic buybacks, disciplined M&A. Long-term target of 10% top-line growth with ~1/3 from M&A; ~30% of 2025 revenue came from acquired businesses and management reports an active pipeline.
Tax Rate and Corporate Expense Guidance
Adjusted effective tax rate was 20%, in line with expected full-year adjusted rate of 20–21%; management expects unallocated corporate expenses of $40–43M and total 2026 capex of $90–100M (including ~$50M facility expansion).
Operator
Good morning, and welcome to the First Quarter Conference Call for Graco Inc. If you wish to access the replay for this call, you may do so by visiting the company's website at www.graco.com. Graco has additional information available in a PowerPoint slide presentation, which is available as part of the webcast player. [Operator Instructions] During this call, various remarks may be made by management about their expectations, plans and prospects for the future. These remarks constitute for looking statements for the purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. Actual results may differ materially from those indicated as a result of various risk factors, including those identified in Item 1A of the company's 2025 annual report on Form 10-K and in Item 1A of the company's most recent quarterly report on Form 10-Q. These reports are available on the company's website at www.graco.com, and the SEC's website at www.sec.gov. Forward-looking statements reflect management's current views and speak only as of the time they are made.
The company undertakes no obligation to update these statements in light of new information or future events. I will now turn the conference over to Chris Knutson, Vice President, Controller and Chief Accounting Officer.
Christopher Knutson
Good morning, everyone, and thank you for joining the call. I'm here today with Mark Sheahan, David Lowe and Sanjiv Gupta. I'll begin with a brief overview of our first quarter results and then turn the call over to Mark for additional commentary. Yesterday, Graco reported first quarter sales o...
Subscribe to unlock transcripts
Get The Fly Pro 7 days for free