Minneapolis industrial sprayer Graco ends year by doubling quarterly earnings

Industrial spray maker Graco reached its yearly sales goals after a boost from all segments and regions during the fourth quarter, and profits were in line with expectations.

Earnings on the quarter doubled to $73.7 million, or 43 cents per share, in line with analysts' estimates. Sales were up 8 percent to $406.4 million on the quarter and $1.65 billion for the year ending Dec. 28.

The company's gross profit margin rate decreased 2 percentage points on the quarter due to changes in product mix, higher material costs, factory spending and tariffs. The rate for the year also was slightly lower.

Graco is best known for making paint sprayers, industrial pumping systems for food giants and foam sprayers used to insulate homes and offices. The company sells to distribution channels across North and South America, Europe, the Middle East, Africa and China and other Asia Pacific countries.

With a robust market and solid global demand for its products, the company forecasts full-year revenue growth for 2019 in the mid-single digits. While Graco executives said they are bracing for further disruptions to U.S.-China trade, as are all of Minnesota's manufacturers, the company expects sales to continue expanding across its three business segments and in every geographic region.

"Heading into a new year, the business is performing well and demand levels worldwide remain solid," Graco CEO Patrick McHale said.

The company released results after the market closed on Monday. At the closing of Tuesday's market, shares were up nearly 4 percent, at $43.49.

The contractor segment, which makes up slightly less than a third of the business, was the most volatile, posting a sales increase of 3 percent, and an 11 percent decline in earnings in the quarter. The division is under margin pressure due in part to more expensive materials and costs of a major factory expansion in Rogers.

McHale told analysts in a conference call Tuesday that pressure on margins will continue through the first half of the year. But with the construction market poised for continued growth, he and other executives remain optimistic.

Graco's fast-growing process segment, its smallest, notched its forth consecutive quarter of double-digit growth. Sales were up 14 percent in the fourth quarter and contributed 20 percent growth in operating earnings compared with a year ago.