Q3 2024 Summary
Published Feb 18, 2025, 5:24 PM UTCInitial Price$79.00June 27, 2024
Final Price$87.64September 27, 2024
Price Change$8.64
% Change+10.94%
- Graco maintained strong gross margins despite lower volumes due to effective pricing strategies and efficient operations, indicating strong pricing power and positioning the company for significant operating leverage when volumes recover.
- The company has an active M&A pipeline with about 100 companies under consideration, which, along with the new Expansion Markets division focusing on growth through acquisitions in new or adjacent markets, suggests potential for accelerated growth.
- Recent order activity has shown improvement over the past six weeks, particularly in the Industrial and Process segments, which may signal a recovery in demand. Additionally, bookings in the semiconductor business are starting to pick up, anticipating growth in 2025.
- Significant decline in China sales: Q3 China sales were down about $10 million for Industrial and Process segments, and total Asia Pacific sales were down $11.2 million, primarily due to headwinds in automotive, mining, battery production, solar, and electronics markets in China. The Asia Pacific market has been really challenging, impacting overall company performance.
- Weakness in the Process segment affecting profitability: The Process segment experienced worsening decremental margins throughout the year due to volume declines across almost all factory locations. Additionally, there was weak activity in the lubrication businesses, which are highly profitable, and the semiconductor business was way down from a year ago. Ongoing softness in the Asia Pacific region, particularly in semiconductor and mining markets, continues to negatively affect the Process segment.
- Overcapacity and prolonged downturn in key China markets: Overcapacity in China's key markets like semiconductor, automotive, battery, and solar has led to decreased demand, and the company does not anticipate a meaningful impact from government stimulus in the short term. The construction sector could experience a downturn that could go on for quite a while, with millions of units constructed that are empty, requiring more than liquidity programs to drive confidence for end users to make big investments.