Fluid and coating equipment company Graco (NYSE:GGG) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 7.3% year on year to $528.3 million. Its non-GAAP profit of $0.70 per share was 4.2% above analysts’ consensus estimates.

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  • Revenue: $528.3 million vs analyst estimates of $526.2 million (7.3% year-on-year growth, in line)

  • Adjusted EPS: $0.70 vs analyst estimates of $0.67 (4.2% beat)

  • Adjusted EBITDA: $168.7 million vs analyst estimates of $168 million (31.9% margin, in line)

  • Operating Margin: 27.3%, in line with the same quarter last year

  • Free Cash Flow Margin: 21.7%, up from 16.6% in the same quarter last year

  • Market Capitalization: $13.6 billion

Graco’s first quarter results reflected steady demand across most segments, with particular improvement in industrial and expansion markets. Management highlighted that recent sales benefited from recovery in previously soft end-markets, such as semiconductors and China industrial, as well as ongoing contributions from the Corab acquisition. However, contractor segment performance continued to be pressured by weak home center activity, offset by growth in North American propane and professional paint channels.

Looking forward, the company’s guidance remains cautious due to evolving U.S.-China tariff policies. CEO Mark Sheahan pointed out that while Graco’s U.S. manufacturing footprint offers some insulation, approximately 6% of both revenue and cost of goods sold are exposed to China. Sheahan stated, “We have about three months of finished goods inventory in China and about three months of components in our U.S. manufacturing locations, which will help limit our exposure in the second quarter.” Management is preparing mitigation strategies but acknowledged that tariffs could reduce full-year revenue by 1% to 2%.

Management’s commentary underscored how operational actions, end-market trends, and external pressures shaped the quarter’s performance and outlook.

  • Tariff Headwinds Mitigation: Management is actively addressing the impact of new U.S.-China tariffs. The company has implemented a pricing surcharge on goods subject to retaliatory tariffs shipped into China and is exploring supplier diversification, component sourcing shifts, and product redesigns to limit exposure. About 6% of Graco’s revenue and cost of goods sold are tied to China, making this a material external risk.

  • Corab Acquisition Integration: The recently acquired Corab business contributed meaningfully to sales growth. Early integration efforts have focused on maintaining customer relationships and introducing Corab’s technology to North American customers. Management characterized performance as meeting expectations, with no major disruptions so far.

  • Industrial and Expansion Markets Recovery: Both industrial and expansion markets segments grew, reversing declines from last year, especially as semiconductor and environmental businesses rebounded. Industrial margins benefited from revenue growth and cost savings from the “One Graco” efficiency initiative.

  • Contractor Segment Dynamics: The contractor segment was weighed down by softness in the home center channel and challenging conditions in Europe, though North American professional and propane products saw improved demand. Management expects upcoming product launches to support future growth in this segment.

  • Inventory and Pricing Strategy: Graco has built up inventories in China and U.S. locations to buffer near-term tariff effects while deferring broad price increases. Leadership emphasized patience and flexibility, stating that additional pricing actions would be considered only as markets clarify.