Graco Surpasses Q2 Earnings Estimates, Reaffirms 2026 View

On a regional basis, quarterly sales generated from the Americas increased 5.5% year over year to $371.4 million. Sales from the Asia Pacific increased 1.6% year over year to $91.4 million. In Europe, the Middle East and Africa, sales fell 1.6% year over year to $127.8 million.

Acquisitions Offset Organic Slide

Graco’s acquired operations had a positive contribution of 3% to sales growth, while currency translation had a favorable impact of 1%. These tailwinds more than offset a 1% organic decline that management tied to softer timing of finishing system sales and certain project-related activities.

Management highlighted that incoming order rates increased as the quarter progressed, and the company exited the quarter with a solid order trend. This supported the increase in organic order backlog relative to 2025-end.

Graco Segment Sales

Contractor segment sales increased 4% year over year to $299.4 million, driven by strength in protective coating and spray foam product categories. While acquisitions and currency translation had a positive impact of 3% and 1%, respectively, on sales growth, organic sales were flat. 

Industrial segment sales rose 3% to $249.2 million, supported by acquired businesses but were weighed down by powder finishing system completions and other projects. Acquisitions had a positive impact of 5% on sales growth. While currency translation had a favorable impact of 1% on sales, organic sales decreased 3%.

Expansion Markets sales increased 3% to $41.9 million, owing to an increase in semiconductor product application sales in the Americas. While organic sales improved 3% on a year-over-year basis, currency translation and acquisitions did not have any material impact on sales.

Margin Profile of Graco

In the second quarter, Graco’s cost of sales increased 0.5% year over year to $273.6 million. Gross profit increased 5.8% to $316.9 million, while the margin of 53.7% was up 130 basis points (bps) year over year. Margins were supported by the receipt of tariff refunds and disciplined operating expenses.

Adjusted operating income increased 11% year over year to $183.2 million. The operating margin increased 230 bps to 31% from the year-ago quarter. Interest expenses totaled $835 million compared with $655 million in the previous year’s quarter. The adjusted effective tax rate was 20.4% compared with the year-ago quarter’s 20.1%.

Graco’s Balance Sheet and Cash Flow

Graco ended the quarter with $507.6 million in cash and cash equivalents, down from $624.1 million at the end of 2025. It generated net cash of $298 million from operating activities in the first six months of 2026 compared with $308.1 million in the year-ago period. Capital used for purchasing property, plant and equipment totaled $28.6 million compared with $30.2 million in the year-ago period.

Graco paid out dividends worth $97.7 million to its shareholders in the first six months of the year, up 6% from the year-ago period. It repurchased shares worth $331.1 million in the same period.

2026 Outlook

Graco continues to expect organic sales to increase in the low single digits on a constant-currency basis in 2026. Sales are anticipated to grow in mid-single digits, including acquisitions. For third-quarter 2026, it expects sales to be in the range of $580-$600 million (excluding the announced acquisition of Valco Melton).

Zacks Rank and Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space are discussed below:

Applied Industrial Technologies AIT carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Applied Industrial’s earnings surpassed the consensus estimate in each of the trailing four quarters. The average earnings surprise was 4.0%.  In the past 60 days, the Zacks Consensus Estimate for Applied Industrial’s fiscal 2026 bottom line has inched up 0.1%.

Dover Corporation DOV presently carries a Zacks Rank of 2. Dover’s earnings surpassed the consensus estimate in each of the trailing four quarters. The average earnings surprise was 2.1%. In the past 60 days, the Zacks Consensus Estimate for DOV’s 2026 earnings has been stable.

Generac Holdings GNRC currently carries a Zacks Rank of 2. Generac Holdings’ earnings topped the consensus estimate twice and missed on the other two occasions in the trailing four quarters. The average earnings surprise was 7.4%. In the past 60 days, the Zacks Consensus Estimate for GNRC’s 2026 earnings has been stable.

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