Graco's Q1 2025 Earnings Call: Unpacking the Contradictions in Orders, Tariffs, and Market Growth

Order trends and customer responses to tariffs, tariffs and inventory management, demand trends and market conditions, expand markets growth and segment performance, M&A and growth strategy are the key contradictions discussed in Graco's latest 2025Q1 earnings call.



Revenue and Sales Growth:
- Graco Inc. reported first quarter sales of $528 million, an increase of 7% from the first quarter of last year.
- The growth was driven by contributions from the acquisition of COROB, which accounted for 6%, and organic sales growth of 3%.

Earnings and Operating Expenses:
- Reported net earnings increased 2% to $124 million or $0.72 per diluted share, with adjusted non-GAAP net earnings increasing by 8%.
- Operating expenses remained flat due to offsetting effects from acquisitions and savings from the One Graco initiative.

Gross Margin and Incremental Margins:
- The gross margin rate decreased by 150 basis points, primarily due to the acquisition impact and higher product costs from lower factory volume.
- The Industrial segment achieved nearly 100% incremental margins for the quarter due to increased volume and cost management efforts.

Tariff and Supply Chain Impact:
- Graco acknowledged that tariffs between the United States and China could impact its business, with China accounting for 6% of global revenue.
- The company is proactively moving inventory to non-bonded status in China and exploring alternative suppliers and product redesigns to mitigate tariff impacts.