Despite continued softness in Europe and Asia,
) reported stellar fourth quarter 2012 results with earnings of
$42.3 million or 68 cents per share compared to $30.4 million or
50 cents per share in the year-ago quarter. The year-over-year
increase in earnings was primarily attributable to the accretive
acquisition of the Gema Powder Finishing business and superior
execution of operational plans at the factory level. The earnings
in the reported quarter were well ahead of the Zacks Consensus
Estimate of 60 cents.
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For full year 2012, the company reported earnings of $149.1
million or $2.42 per share compared to $142.3 million or $2.32
per share in the previous year. Full-year earnings surpassed the
Zacks Consensus Estimate by 7 cents.
Net sales for fourth quarter 2012 came in at $253.7 million, up
17.7% year over year and ahead of the Zacks Consensus Estimate of
$251 million. Quarterly sales increased 39% in Europe and 20% in
the Americas, but dipped 5% in Asia Pacific. For full year 2012,
net sales surged 13.1% year over year to $1,012.5 million as all
the geographic regions as well as the operating segments recorded
Gross margin came in at 55% in the reported quarter, marginally
up from 54% in the year-ago quarter, as solid operational
performance in legacy businesses offset the lower margin rates on
acquired Powder Finishing operations.
segment witnessed a 25% rise in net sales to $156.4 million,
driven by the Powder Finishing operations. On a geographic region
basis, sales increased 10% in the Americas, and decreased 7% and
2% in Asia Pacific and Europe, respectively.
Net sales for the
segment increased 13% year over year to $69.9 million, largely
due to a strong performance in the Americas (up 25%), partially
offset by disappointing performance in Europe (down 4%) and Asia
Pacific (down 6%).
During the quarter, the
segment recorded a 3% decline in net sales to $27.4 million as
sales decreased 39% in Asia Pacific, partially offset by an 8%
increase in the Americas and a 16% increase in Europe.
Balance Sheet and Cash Flow
Cash and cash equivalents at year-end 2012 were $31.1 million
versus $303.1 million in the previous year. Long-term debt
increased to $556.5 million in 2012 from $300 million in 2011. At
year-end 2012, net cash provided by operating activities surged
to $189.7 million from $162.0 million in the prior-year period.
For full year 2013, management anticipates growth across all
geographic regions. In the Americas, the company expects to
benefit from the continued recovery in construction market,
particularly in its Contractor and Industrial segments. A modest
increase is also expected in Europe driven by the emerging
markets in Eastern Europe. Asia Pacific is expected to witness a
gradual improvement over the year to record relatively moderate
growth. Furthermore, with steady volume increase and solid
factory-level performance, Graco expects to register
comparatively healthy growth in both the top and bottom line in
However, the company needs to be wary of stiff competition in the
market from other leading players like
Altra Holdings, Inc.
Atlas Copco AB
), each carrying a Zacks Rank #1 (Strong Buy). Graco currently
has a Zacks Rank #3 (Hold).