) reported third quarter 2012 earnings per share of 60 cents,
which remained flat year over year but increased from 56 cents in
the previous quarter. The earnings in the reported quarter missed
the Zacks Consensus Estimate of 70 cents per share. Net income
came in at $37.1 million, up 1.4% year over year and 7.8%
Net sales came in at $256.5 million, up 12.8% year over year
(15% on a constant currency basis), but down 4.4% sequentially.
This, however, missed the Zacks Consensus Estimate of $271
million. The annual rise in the sales was mostly driven by the
company's improved operations in its Powder Finishing
On a segmental basis, the Industrial segment sales ameliorated
24% from the year-earlier quarter to $154.7 million. Revenues
from the Contractor segment sales were $74.9 million, down 4%
from the year-ago quarter. The Lubrication segment sales climbed
up 7% from the year-ago quarter to $26.9 million.
Geographically, sales were up 11% year over year in the
Americas on the back of the Industrial and Lubrication segments'
sales which were increased by double-digit during the quarter.
Sales increased 4% in Asia Pacific carrying the onuses of the
company's weak business condition. The European market sales
escalated about 28% (38% at consistent translation rates), driven
by the improved Lubrication and Contractor segments sales.
Gross margin came in at 55% in the reported quarter, declining
from 56% in the year-ago quarter but up from 52% in the previous
quarter. The annual decline occurred owing to non-recurring
purchase, increased material costs, negative currency translation
and Powder Finishing operations' reduced margin rates, offsetting
the price increase during the quarter.
Operating margin came down to 22% from 25% in the previous
year quarter but up from 19.6% in the prior quarter. The Powder
Finishing operations resulted in a surge in operating expenses of
nearly $8 million during the quarter.
The effective tax rate for the reported quarter was 32%, which
remains flat year over year.
Year-to-date net cash provided by operating activities was
$132 million versus $109 million in the previous year period.
Management anticipates that its businesses in China, India and
Western Europe will face a downturn owing to the prevailing
uncertain economic condition. However, its business in the
Americas would experience a positive growth trend in the upcoming
quarter of 2012. Steady housing recovery in U.S. is likely to
drive Graco's Contractor equipment business going forward.
Furthermore, according to the company, it will strengthen its
foothold through its diversified businesses and latest product
Graco currently has a Zacks #2 Rank, which implies a
short-term (1-3 months) 'Buy' rating on the stock.
GRACO INC (GGG): Free Stock Analysis Report
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