) reported second quarter 2012 earnings per share of 56 cents,
compared to 61 cents in the year-ago quarter and 58 cents in the
previous quarter. The earnings in the reported quarter missed the
Zacks Consensus Estimate of 68 cents per share. Net income came in
at $34.4 million, down 10% year over year and 2.8%
Net sales came in at $268.2 million, up 14% year over year (17%
on a constant currency basis), and 14.6% sequentially. This,
however, missed the Zacks Consensus Estimate of $283 million. The
improved sales across North America provided a boost to the
consolidated sales of the company during the quarter.
On a segmental basis, the Industrial segment sales ameliorated
22% from the year-earlier quarter to $158.2 million. Revenues from
the Contractor segment sales were $82.1 million, up 2% from the
year-ago quarter. The Lubrication segment sales climbed up 13% from
the year-ago quarter to $27.9 million.
Geographically, sales were up 12% year over year in the
Americas. Sales increased 14% (16% at consistent translation rates)
in Asia Pacific on the back of the Contractor segment sales which
improved considerably. The European market sales escalated about
19% (29% at consistent translation rates), carrying the onuses of
the weakened fiscal conditions and currency translation prevailing
in the Western Europe region which were partially offset by the
improvement in the business of Eastern Europe region.
Gross margin came in at 52% for the reported quarter, declining
from 56% in the year-ago quarter and down from 56.5% in the
previous quarter. The annual decline occurred owing to
non-recurring purchase and negative currency translation during the
Operating margin came down to 19.6% from 24.8% in the previous
year quarter and also down from 24.8% in the prior quarter. The
acquisition expenses and Powder Finishing operations resulted in a
surge in operating expenses of nearly $5 million and $8 million,
The effective tax rate for the reported quarter was 32%, which
remains flat year-over-year.
During the second quarter of 2012, Graco generated $41 million
of net cash from operating activities compared with $44 million in
the previous year quarter.
Management expects that its all business segments are likely to
experience a positive growth trend in the second half of 2012 (on
constant currency). Important growth driver averred by management
include sales from the Americas region. Furthermore, according to
the company the demand for Contractor and Lubrication products in
the Asia Pacific region is also likely to surge in the coming
quarters. However, Graco remains wary of weaknesses that are
expected to arise from the negative currency translation in Europe
as it moves through 2012.
Graco currently has a Zacks Rank#4 which implies a short-term
(1-3 months) 'Sell' rating on the stock.
GRACO INC (GGG): Free Stock Analysis Report
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