Graco’s second quarter results disappointed expectations, and the market responded negatively, as management pointed to muted organic sales and margin compression. The quarter was defined by weak demand in North American construction markets and the lingering impact of tariffs, which drove higher costs and pressured margins. CEO Mark Sheahan described the operating environment as "choppy or sluggish," noting that delays in end-user project decisions and persistent housing affordability issues weighed on the Contractor segment. Management also highlighted that recent acquisitions, while contributing to top-line growth, came with integration costs and further margin dilution.
Is now the time to buy GGG? Find out in our full research report (it’s free).
Graco (GGG) Q2 CY2025 Highlights:
- Revenue: $571.8 million vs analyst estimates of $590.2 million (3.4% year-on-year growth, 3.1% miss)
- Adjusted EPS: $0.75 vs analyst expectations of $0.79 (4.9% miss)
- Adjusted EBITDA: $184.6 million vs analyst estimates of $190.3 million (32.3% margin, 3% miss)
- Operating Margin: 27.5%, down from 29.2% in the same quarter last year
- Market Capitalization: $14.01 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Graco’s Q2 Earnings Call
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Deane Dray (RBC Capital Markets) asked about the rationale and expected effectiveness of the September price increase. CEO Mark Sheahan clarified these hikes are targeted and intended solely to offset tariff pressures, with a low single-digit magnitude in select areas.
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Michael Pesendorfer (Baird) inquired about strategic logic and integration plans for the Color Service acquisition. Sheahan explained the move expands Graco’s dosing technology into adjacent industries and offers potential for operational and customer integration with the Gema Powder division.
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Saree Boroditsky (Jefferies) pressed on the sustainability of pricing actions and segment targeting. Sheahan confirmed both Contractor and Industrial groups are participating, and that standard annual price adjustments will resume in the following year.
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Jeffrey Hammond (KeyBanc Capital Markets) sought clarity on drivers of expected second-half growth. Sheahan pointed to incoming order trends, the benefit of price increases, and easier year-over-year comparisons, while acknowledging market volatility.
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Andrew Buscaglia (BNP Paribas Exane) asked about incremental margins and balancing acquisitions with return targets. CFO Christopher Knutson noted that incremental margins depend on growth mix, with the industrial segment offering the highest potential, and assured that disciplined return thresholds are maintained for M&A.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely monitor (1) the effectiveness and customer acceptance of September’s price increases in offsetting tariff pressures, (2) evidence of a sustained recovery in North American construction and DIY channels linked to housing market developments, and (3) progress on integration and synergy realization from recent acquisitions, particularly Color Service. Execution of facility consolidation and efficiency gains from One Graco will also be key markers to watch.
Graco currently trades at $84.57, down from $87.19 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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