Graco Inc.

Graco reported second-quarter sales of $591 million, up 3% year over year. Reported net earnings were $145 million, or $0.87 per diluted share, up 14% from the prior year; adjusted EPS was $0.91, up 17%. Gross margin increased 130 basis points year over year, operating margin was 30% of sales versus 26% last year, and operating earnings rose 11%. For the first six months, operating cash flow was $298 million. Looking ahead, management maintained the full-year outlook and guided third-quarter revenue to $580 million to $600 million, excluding VELCRO Meltan, which is expected to close in Q3. They also said currency should provide about a 1% favorable impact to full-year sales and earnings, and full-year unallocated corporate expenses are expected to be $39 million to $42 million, capital expenditures $90 million to $100 million, and the adjusted tax rate 20% to 21%.

Mark Sheahan said the quarter reflected record sales, record earnings, and margin expansion driven by disciplined expense management and execution across all three segments. He emphasized improving customer activity, stronger bookings, and a 28% increase in backlog from the start of the year as reasons for confidence in a stronger second half. He also framed VELCRO Meltan as a strategically important acquisition and said Graco remains active on additional M&A while keeping focus on innovation and targeted growth markets.

Sanjiv Gupta highlighted that Q2 sales of $591 million were up 3%, with acquisitions contributing 3% and currency adding 1%, partly offset by a 1% organic decline tied mainly to industrial timing. He said gross margin rose 130 basis points, supported by price realization, manufacturing performance, and $9 million of tariff refunds net of surcharges, while operating expenses were essentially flat despite inflation and acquisitions. He also pointed to $298 million of operating cash flow in the first half, $331 million spent on repurchasing 4.2 million shares, $898 million paid in dividends, and $29 million of capex, and reiterated full-year expectations for unallocated corporate expenses, capex, taxes, and about a 1% favorable currency impact.

Analysts focused on why Graco is now giving quarterly sales guidance, how bookings and backlog translate into second-half revenue, and whether the company would continue this practice. Management said visibility is good over a 13-week period, the new guidance is meant to be more helpful and will be a going-forward change, and the second half should benefit from backlog, easier powder comparisons, Color Service contribution, and momentum in Contractor and semiconductor. Questions also probed the VELCRO Meltan deal, where management said the business has gross margins of 50% or more, about 5 of its 27 locations are manufacturing sites, and the rest are sales and service offices.