GRACO INC. 10-Q Summary: Period Ended June 26, 2026
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 26, 2026, and the six months ended on that date. Graco Inc. designs, manufactures, and markets fluid and coating management systems across three segments: Contractor, Industrial, and Expansion Markets. The company is a large accelerated filer with 161,953,824 shares of common stock outstanding as of July 8, 2026.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Net Sales | $590.6M | $571.8M | $1,130.7M | $1,100.1M |
| Gross Profit | $316.9M | $299.5M | $597.6M | $577.3M |
| Gross Margin % | 53.7% | 52.4% | 52.9% | 52.5% |
| Operating Earnings | $175.1M | $157.5M | $312.9M | $301.5M |
| Net Earnings | $144.9M | $127.6M | $263.4M | $251.7M |
| Diluted EPS | $0.87 | $0.76 | $1.58 | $1.48 |
| Operating Cash Flow (YTD) | $298.0M | |||
| Cash & Equivalents | $507.6M (as of June 26, 2026) | |||
| Total Debt (Current + Long-term) | ~$29.2M (Notes payable + Current portion of LT debt) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 3% in Q2 and 3% YTD. Growth was driven by 3 percentage points from acquisitions and 1 percentage point from favorable currency translation, partially offset by a 1 percentage point organic decline in the Industrial segment due to project timing.
- Profitability: Operating earnings rose 11% in Q2 and 4% YTD. Adjusted operating earnings increased 11% in Q2, aided by lower operating expenses and $9 million in tariff refunds (net of surcharges).
- Segment Performance:
- Contractor: Sales up 4% QTD; operating margin expanded 4 percentage points to 30% due to lower expenses and tariff refunds.
- Industrial: Sales up 3% QTD; organic sales declined due to finishing system timing, offset by $11M in acquired sales. Margin remained flat at 34%.
- Expansion Markets: Sales up 3% QTD driven by semiconductor applications; margin improved 1 percentage point to 23%.
- Non-GAAP Adjustments: The company updated its non-GAAP methodology to exclude acquisition costs and amortization of acquired intangible assets. Adjusted Net Earnings were $151.0M for Q2 and $269.2M YTD.
Guidance, Outlook, and Risks
- Outlook: Management expects low single-digit organic constant-currency sales growth for 2026 and mid-single-digit growth including acquisitions. Q3 2026 sales are estimated at $580M–$600M, excluding the pending Valco Melton acquisition.
- Acquisition: On May 20, 2026, Graco agreed to acquire Valco Melton for $447 million. The deal is expected to close in Q3 2026 and be funded with cash on hand.
- Liquidity: Available liquidity stands at $1,279 million, including $508 million in cash and $771 million in available credit. Capital expenditures for 2026 are projected at approximately $100 million.
- Capital Allocation: The company repurchased $331 million of stock YTD and paid $98 million in dividends. A share repurchase program remains active with 18.8 million shares remaining under authorization.
- Risks: Key risks include global economic conditions, currency fluctuations, tariff legislation changes, supply chain disruptions, and the integration of acquired businesses. The company notes uncertainty regarding the timing of further tariff refunds.
Investor Verification Checklist
- Tariff Refunds: Verify the sustainability of the $9 million in IEEPA tariff refunds recognized in Q2 and the potential for future refunds or surcharges.
- Valco Melton Acquisition: Confirm the closing timeline and integration costs for the $447 million Valco Melton acquisition expected in Q3.
- Industrial Segment Timing: Monitor the Industrial segment for recovery in finishing system sales and project activity that caused the organic decline in Q2.
- Share Repurchases: Track the pace of share buybacks ($331M YTD) against the remaining authorization to assess future capital return strategy.
- Non-GAAP Reconciliation: Review the reconciliation of GAAP to Adjusted Operating Earnings to understand the impact of excluded acquisition costs and intangible amortization.