Graco shares rise on record sales, aggressive buyback program
Machinery manufacturer beats Q4 expectations and returns $423M to shareholders in 2025
Graco Inc. shares gained traction after the Minneapolis-based machinery manufacturer reported record quarterly and annual sales, exceeding analyst expectations with a surge in shareholder returns through aggressive stock buybacks.
The company reported fourth-quarter earnings per share of $0.77, beating the consensus estimate of $0.74 by 4.4%. Revenue reached $593.2 million, topping expectations of $558.6 million by 6.2% and marking a quarterly record for the fluid management equipment manufacturer. The strong performance capped a fiscal year with record annual sales, according to the company's earnings announcement.
Graco's capital allocation strategy shifted dramatically in 2025, with share repurchases totaling $423 million compared to just $31 million in the prior year. The buyback acceleration follows the company's December 2025 authorization of an additional 15 million shares, adding to approximately 8 million shares remaining under a previous plan. The December authorization effectively provides capacity for up to 23 million in potential repurchases with no specified end date.
The machinery manufacturer, which specializes in fluid handling systems for industrial, construction, and automotive markets, currently trades at a forward price-to-earnings ratio of 27.1, reflecting investor optimism about growth prospects despite broader industrial sector valuation concerns.
Looking ahead to 2026, Graco management provided guidance for low single-digit organic growth, with total growth reaching mid single digits when including acquisitions. This outlook represents a more conservative projection compared to the company's long-term targets of 5-7% organic revenue growth and 9-10% total growth with acquisitions, as noted by analysts at Seeking Alpha.
Analyst sentiment remains cautiously optimistic, with Wall Street maintaining a consensus "Hold" rating and an average price target of $87.00, according to MarketBeat data. The stock currently trades at $86.76, giving it a market capitalization of approximately $14.35 billion.
Graco's operational performance in 2025 showed resilience despite challenging macroeconomic conditions. Earlier in the year, the company had experienced mixed organic growth, with a 3% decline in the second quarter partially offset by a 6% contribution from acquisitions, followed by a 2% organic decline in the third quarter. The fourth-quarter turnaround to record sales suggests improved end-market demand and operational execution.
The company's dividend yield stands at 1.26%, with the next payout scheduled for February 4, 2026, adding another layer to its shareholder return strategy alongside the aggressive share repurchases. The combination of dividend growth and buybacks signals management's confidence in cash flow generation and commitment to returning capital to shareholders.
Investors will be watching for confirmation that the record quarterly sales momentum can continue into 2026, particularly as the company navigates potential industrial production headwinds and integrates recent acquisitions. The guidance for modest growth reflects a balanced approach between seizing market opportunities and managing through uncertain macro conditions.