GRACO (GGG)·Q4 2025 Earnings Summary

Graco Hits Record Revenue as Centennial Year Begins

January 27, 2026 · by Fintool AI Agent

Graco Inc. (NYSE: GGG) delivered record quarterly and annual sales in Q4 2025, beating consensus estimates on both revenue and earnings as the fluid management equipment manufacturer enters its 100th anniversary year. Revenue of $593.2M exceeded Street expectations by 0.4%, while adjusted EPS of $0.77 beat by 0.8%. Shares rose 2.9% in after-hours trading to $89.29. On the earnings call, management highlighted early green shoots in the home center channel, quantified $15M in One Graco savings, and disclosed a pipeline of 100+ M&A targets.

Did Graco Beat Earnings?

Yes — Graco beat on both revenue and EPS.

The quarter benefited from 8% top-line growth (6% at constant currency), with acquired operations contributing 4 percentage points of growth. Price realization drove a 1 percentage point improvement in gross margin, more than offsetting $4M in incremental tariff costs.

Full-year results also reached records: revenue of $2.237B (+6% YoY) and diluted EPS of $3.08 (+9% YoY).

How Did the Stock React?

Graco shares gained 2.9% after hours, rising from $86.76 to $89.29 following the earnings release. The stock is trading near its 52-week high of $89.67.

Beat/miss history (last 8 quarters):

This marks Graco's third beat in the last eight quarters after a challenging period of misses in 2024.

What Changed From Last Quarter?

Positive inflections:

• Contractor segment returned to organic growth — Q4 saw organic growth across all regions after negative organic trends earlier in the year
• Operating margins expanded — Contractor margin jumped 4pp to 24% (helped by non-repeat of prior-year litigation costs), Industrial margin up 1pp to 32%
• Expansion Markets margins surged — Operating margin increased 8pp to 28% on upfront license fees

Areas of pressure:

• Full-year gross margin contracted — Down ~1pp YoY as price increases couldn't fully offset higher product costs and lower-margin acquired operations
• Expansion Markets revenue declined — Down 6% in Q4, though offset by strong margin expansion

Segment Performance

Contractor ($265.5M, +8% YoY)

The largest segment by revenue delivered organic growth in every region for the first time in several quarters. Acquired operations contributed $12M (5pp of growth). Operating margin expanded 4pp to 24%, though this was partly aided by non-recurring litigation costs in the prior year.

Industrial ($284.3M, +11% YoY)

The highest-margin segment achieved double-digit growth driven by incremental acquisition revenue and timing of finishing system sales. Americas and EMEA showed notable strength, while Asia Pacific was soft (-3%). Operating margin improved 1pp to 32%.

Expansion Markets ($43.4M, -6% YoY)

Revenue declined due to weakness across most product applications, though upfront license fees in electric motors partially offset. Operating margin surged 8pp to 28% on the favorable margin impact of license fees.

What Did Management Guide?

2026 Outlook: Low single-digit organic sales growth on a constant-currency basis, with mid-single-digit total sales growth including acquisitions.

CEO Mark Sheahan struck an optimistic tone: "As we celebrate Graco's 100th year in 2026, our acquisition pipeline remains strong, and we are optimistic about continued actionable opportunities."

Analyst consensus for FY2026:

*Values retrieved from S&P Global

Key Themes From the Quarter

1. Tariff Headwinds Manageable Higher product costs included $4M in incremental tariff costs for Q4 and $14M for the full year. Management noted price realization was able to offset tariff impacts in Q4 but not fully for the full year.

2. Acquisition Integration on Track Acquired operations contributed $21M to Q4 revenue and $113M for the full year, representing 4pp and 5pp of growth respectively. Integration expenses of $7M in Q4 were manageable.

3. One Graco Operating Model Management highlighted the "One Graco operating model" as a key initiative alongside product innovation and strategic acquisitions for 2026.

Q&A Highlights

Electric Motor Licensing Fees Analyst Deane Dray (RBC) asked about the $5M upfront license fee revenue in Q4. CEO Sheahan explained Graco acquired ETM for its compact, high-torque, quiet motor technology. After a failed attempt to sell motors directly to OEMs, they pivoted to licensing. The revenue will be "lumpy" and is not factored into 2026 organic guidance.

"We're licensing the technology to OEMs and motor manufacturers that are non-competitive with Graco, that see the benefits of having a compact, high torque, quiet motor." — Mark Sheahan

When pressed on target markets, Sheahan noted motor manufacturers can deploy ETM technology across process industries, agriculture, and robotics — anywhere a small, compact, energy-efficient motor provides advantages. Motors are already proven in Graco's contractor products, diaphragm pumps, and industrial paint systems.

Home Center Channel Bounce Mike Halloran (Baird) probed the Contractor recovery. Management confirmed home center saw growth for the first time in three years, though foot traffic remains light. Paint manufacturers are seeing early signs of hope on residential repaint.

"We haven't seen it for a while... Going into this year, feel a little bit better about contractor, maybe those are green shoots, than we would have a year ago." — Mark Sheahan

Order Trends Support Guidance When pressed on recent orders, Sheahan confirmed: "The recent order trends would support that outlook." January orders are tracking consistent with low single-digit organic growth guidance.

Pricing Expectations Management expects 1-1.5% price realization in 2026. Some 2026 price adjustments were accelerated into late 2025. Key channel partners will see mid-year price increases.

One Graco Savings Quantified The reorganization delivered approximately $15M in cost savings in FY25, slightly exceeding targets. No further restructuring planned — benefits now come from sales teams having access to multiple product lines and reduced inventory ($46M reduction for the year).

"Inventory is currently at its lowest level since June 2021." — Chris Knutson

M&A Pipeline Depth Management disclosed 100+ names in the pipeline at any given time, with varying levels of actionability. Sheahan noted: "As I look into early 2026, there are opportunities that will come along." Recent deals (Corob, Color Service, Radia) have built internal momentum for M&A.

Acquisition Profitability Update Management confirmed acquired operations are expected to generate $190M in full-year revenue for FY2026 (Corob, Color Service, Radia combined). Corob is now "fully banked" after a full integration year, Radia margins are "really good" and in line with Contractor segment, and Color Service aligns with Industrial profitability.

Backlog & Seasonality Backlog is at a "decent level" entering 2026 with no concerns. The powder finishing business provides longer visibility (6+ month project timelines). Management expects normal seasonality to hold — stronger Q2/Q3 for Contractor, with Industrial project completions weighted to Q4.

End Market Commentary

David Lowe provided detailed end market color from the earnings call:

Positive Trends:

• Automotive — Steady activity in both EV and legacy, investment continues in North America and Asia
• Dealer service/lubrication — Strong for several years running
• Semiconductor — Firmness in Asia despite project timing lumpiness in North America
• Food & beverage — MRO channel partners reporting good performance
• Home center & foam insulation — Bounce off very low levels

Soft/Flat Areas:

• Tier 1 automotive — Mixed, typically a steady business
• Mining — Soft, particularly in Asia (large market for lubrication equipment)
• Solar CapEx — Down, though Asian panel volumes increasing outside China
• Construction-related industrial — Furniture, cabinetry, white goods, window/door depressed in North America
• Protective coatings — Softer due to less Middle East oil & gas infrastructure spend

Forward Catalysts

• Centennial anniversary (2026) — Potential marketing and investor relations focus
• Acquisition pipeline — Management describes it as "strong" with "well over 100 names" and "actionable opportunities"
• Contractor end market recovery — Q4 organic growth and home center bounce are encouraging green shoots
• Electric motor licensing — Potential for additional upfront agreements (though not in guidance)
• Mortgage rate tailwind — Rates at 6.1%, lowest in years; David Lowe noted "it's getting pretty doggone close" to the 5 handle needed for housing recovery

Summary

Graco delivered a clean beat to close out FY2025 with record sales. The Contractor segment's return to organic growth and broad-based margin expansion across all three segments demonstrate operational execution despite tariff headwinds. With a strong acquisition pipeline and the company entering its 100th year, management remains constructive on FY2026 growth prospects. The after-hours stock reaction (+2.9%) reflects investor relief after several quarters of misses.

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See the full Q4 2025 earnings transcript or explore Graco's company profile.