GGG Misses on Bottom Line - Analyst Blog
April 26 2012 - 9:00AM
Zacks
Graco Inc. (GGG)
reported first quarter 2012 earnings per share of 58 cents, missing
the Zacks Consensus Estimate of 62 cents. This compares with
61 cents in the previous year quarter and 50 cents in the last
quarter. Net income came in at $35.4 million, down 5% year over
year but up 16.5% sequentially.
Revenues
Net sales came in at $234.1
million, up 7.5% year over year and 8.6% sequentially. This,
however, marginally missed the Zacks Consensus Estimate of $235
million. Growth was substantial in all three major segments.
Moreover, improved sales across all geographic regions provided an
added boost to the consolidated sales of the company during the
quarter.
On a segmental basis, the
Industrial segment sales improved 9% from the year-earlier quarter
to $134.1 million. Revenues from the Contractor segment sales were
$72.0 million, up 3% from the year-ago quarter. The Lubrication
segment sales soared 14% from the year-ago quarter to $28.0
million.
Geographically, sales were up 9%
year over year in the Americas, attributable to ameliorated sales
across the Lubrication and Industrial segments and pain channel
revenues accruing from North America. Sales increased 10% (8% at
consistent translation rates) in Asia Pacific on the backs of
Lubrication and Contractor segment sales which surged considerably.
The European market sales escalated about 3% (6% at consistent
translation rates), carrying the onuses of the weakened fiscal
clouds of the region which was partially offset by rise in the
Industrial segment demand.
Margins
Gross margin came in at 56.5% for
the reported quarter, down from 57.2% in the year-ago quarter but
up from 54% in the previous quarter. The annual decline occurred
owing to increased material expenses during the quarter which was
only marginally offset by productivity gains.
Operating margin declined to 24.8%
from 26.2% in the previous year period but up from 22.0% in the
previous quarter. The acquisition of the finishing businesses of
Illinois Tool Works Inc. (ITW) resulted in a surge
in operating expenses of nearly $4 million during the quarter which
was the main cause for the downfall in operating margin.
Effective tax rate for the reported
quarter was higher than the prior-year period, coming in at
34.5%.
Balance Sheet and Cash
Flows
Graco ended the quarter with cash
and cash equivalents of $326.8 million, rising from $303.2 million
at the end of the December quarter of 2011. As of March 30,
2012, long-term debt came in at $300 million, in line with the
previous quarter end.
During the first quarter of 2012,
Graco generated $23.5 million of net cash from operating activities
compared with $14.2 million in the previous year quarter and used
$6.5 million for capital expenditures.
Outlook
Graco remains wary of weaknesses
that are expected to arise from the construction markets as it
moves through 2012. Furthermore, the Western European sectors do
not look favorable for the time being. However, important growth
drivers averred by management include sales from the Americas and
Asia Pacific region. Also, product innovations lined up to bolster
performance in 2012.
GRACO INC (GGG): Free Stock Analysis Report
ILL TOOL WORKS (ITW): Free Stock Analysis Report
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