Fluid and coating equipment company Graco (NYSE: GGG) met Wall Streets revenue expectations in Q4 CY2025, with sales up 8.1% year on year to $593.2 million. Its non-GAAP profit of $0.77 per share was in line with analysts’ consensus estimates.

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Company Overview

Founded in 1926, Graco (NYSE: GGG) is an industrial company specializing in the development and manufacturing of fluid-handling systems and products.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Graco’s 6.3% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Graco’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Contractor and Process, which are 44.8% and 47.9% of revenue. Over the last two years, Graco’s Contractor revenue averaged 3.8% year-on-year growth while its Process revenue (pumps, valves, hoses) averaged 23.2% growth.

This quarter, Graco grew its revenue by 8.1% year on year, and its $593.2 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.8% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Graco has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 27.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Graco’s operating margin rose by 1.2 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Graco generated an operating margin profit margin of 26.7%, up 3 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Graco’s EPS grew at a decent 8.6% compounded annual growth rate over the last five years, higher than its 6.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Graco’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Graco’s operating margin expanded by 1.2 percentage points over the last five years. On top of that, its share count shrank by 2.9%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Graco, its two-year annual EPS declines of 1.7% mark a reversal from its five-year trend. We hope Graco can return to earnings growth in the future.

In Q4, Graco reported adjusted EPS of $0.77, up from $0.64 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Graco’s full-year EPS of $2.95 to grow 7.1%.

Key Takeaways from Graco’s Q4 Results

We were impressed by how significantly Graco blew past analysts’ Process revenue expectations this quarter. We were also glad its Contractor revenue topped Wall Street’s estimates. Zooming out, we think this was a decent quarter. The stock remained flat at $86.69 immediately after reporting.

So do we think Graco is an attractive buy at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).