January 26, 2016 - 1:00 PM EST
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U.S. building boom drives strong results for Graco

Jan. 27--The improving construction market in

the United States
is providing a solid cushion for
-based manufacturer Graco Inc., helping it ride out unsettled overseas markets and unfavorable exchange rates that continue to put a drag on earnings.

The company reported fourth-quarter net income of $53.5 million, or 94 cents per share, after the markets closed Monday. That far outpaced Wall Street expectations of 79 cents per share.

Increasing numbers of commercial and residential construction projects translate into higher demand for Graco's spray foam products, paint sprayers and sealants, which it sells around world.

The lion's share of Graco's annual sales -- almost 60 percent -- came from the

and South and
Central America
. Last year, nearly 90 percent of its growth came from its contractor and industrial businesses in the

A strong showing in those business segments, combined with lower factory costs, helped balance a trying year for global manufacturers as a whole with fluctuating exchange rates and still-sputtering markets in the eurozone. Unfavorable exchange rates pulled down Graco's earnings by about 9 cents per share during the fourth quarter, which ended Dec. 25.

"Despite the challenges we face in many end markets and geographies, we continue to press forward with our long-term growth initiatives," CEO Patrick McHale said during a conference call Tuesday. "We're focused on growing and have a great deal of conviction in our business plans."

The company's stock rose nearly 10 percent Tuesday to close at $69.76, up $6.20.

Graco's pumps, mixers and other equipment also are used in such industries as automotive, mining, oil and natural gas exploration and public works. Declines in oil and gas production contributed to flat results in sales of lubricants.

In international markets, the company saw sales drop in the high single digits in

and said it continued to face challenges in
and the
Middle East
during the quarter. Bright spots included
New Zealand

Revenue of $325.6 million for the quarter exceeded analysts' predictions. For the year, Graco reported revenue of $1.29 billion and a $345.7 million profit, or $5.86 per share.

Looking ahead, the exchange rate is expected to continue to take a toll, particularly in the first half of this year. Graco expects it to put a 5 percent drag on earnings and a 2 percent drag on sales.

The company expects single-digit growth for the first quarter and low-to-mid single- digit growth for the full year.


(c)2016 the Star Tribune (Minneapolis)

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Source: Equities.com News (January 26, 2016 - 1:00 PM EST)

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