Gorman-Rupp's Q2 2025 Surge: A Resilient Play in Turbulent Times

Gorman-Rupp (GRC) just delivered a Q2 2025 report that screams resilience. With net sales hitting a record $179 million—a 5.6% year-over-year jump—and earnings per share (EPS) surging to $0.60 from $0.32, the company isn't just surviving in today's volatile market; it's thriving. But what's really caught my eye is how Gorman-Rupp is threading the needle between aggressive growth and disciplined capital management. Let's break down why this could be a compelling long-term play.

The Drivers of Growth: Infrastructure and Data Centers

The municipal market is Gorman-Rupp's crown jewel. Infrastructure spending—particularly for flood control and stormwater management—drove a $3.5 million sales increase in Q2 alone. With the U.S. government pushing hard on infrastructure, this isn't a one-off. The company also capitalized on the data center boom, a sector with no signs of slowing down. Fire suppression, industrial, and petroleum markets added incremental gains, showing the company's ability to diversify its revenue streams.

Debt Reduction: A Shield Against Volatility

Gorman-Rupp slashed $30 million off its debt load in the first half of 2025, reducing interest expenses from $9 million to $6 million. That's not just prudent—it's strategic. With interest rates still elevated, companies with high leverage are at risk, but Gorman-Rupp's balance sheet is fortifying itself. The company's debt-to-equity ratio of 0.87 and a current ratio of 2.42 suggest it's in a strong position to weather economic headwinds.

Valuation: Is the PEG Justified?

At a forward P/E of 21.97 and a PEG ratio of 1.44, Gorman-Rupp isn't cheap. But when you factor in its 20.2% long-term EPS growth projections, the math starts to add up. Analysts are penciling in 18.7% annual earnings growth and 4.1% revenue expansion for the remainder of 2025. The stock's 1.99% yield isn't a headline-grabber, but with a payout ratio of 43.79%, the dividend is sustainable—and the recent hike to $0.185 per share shows management's confidence in cash flow.

Tariffs and Tailwinds: Navigating the Storm

The CEO didn't sugarcoat it: Tariffs are a risk. But Gorman-Rupp's U.S.-based supply chain is a competitive advantage. By proactively raising prices and leveraging its domestic footprint, the company is hedging against global supply chain chaos. That's a critical edge in today's environment, where companies with international exposure are feeling the pinch.

The Bottom Line: Buy, Hold, or Sell?

Gorman-Rupp isn't a high-flyer like Tesla, but it's a steady ship in choppy waters. If you're a long-term investor, this is a stock to consider for its defensive qualities and growth potential. The municipal and data center tailwinds are structural, and the debt reduction progress adds a layer of safety. However, the PEG ratio hints at a slight premium, so investors should be prepared for some volatility.

In conclusion, Gorman-Rupp's Q2 results are a masterclass in balancing growth and prudence. For those looking to hedge against macroeconomic uncertainty while still participating in the infrastructure and tech sectors, GRC is worth a spot on the radar. Just don't expect it to be a fireworks show—this is more of a slow-burn, compounding story.

Final Verdict: Buy for long-term capital appreciation and income. Hold if you're already invested. Sell only if you're chasing yield elsewhere or need liquidity.