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Graco reported record third-quarter sales of $586 million on its October 22, 2026 earnings call. The manufacturing equipment maker said it is defending operating margins of 27% despite an industrial slowdown. It partnered with ABB to supply direct-drive electric motor technology for data center cooling. The licensing deal lets Graco enter the high-density artificial intelligence infrastructure market without heavy capital spending. Graco also acquired adhesive equipment maker Valco Melton. It aims to lift the unit's EBITDA margin from the high teens to the mid-20% range within three years of closing. Backlog, excluding acquisitions, rose $51 million, or 18%, from the start of the year as clients delayed large equipment purchases.

Graco: 3 key takeaways for long-term investors. Graco is positioned to grow without sacrificing profitability during industrial uncertainty, thanks to new data center licensing deals and the company's newly acquired Valco Melton's margin expansion plan. Key points. * Graco reported third-quarter revenue of $586 million, up 8%. * Organic incoming orders increased 7% during the third quarter. * Order backlog increased by $51 million, or 18%, since the start of the year. * 10 stocks The Motley Fool, LLC like better than Graco" On its third-quarter 2026 earnings call, held on Oct. 22, 2026, Graco (GGG -3.31%) announced record sales of $586 million alongside strategic licensing deals in data center cooling. The manufacturing equipment provider relies on a technical moat and disciplined cross-selling to defend 27% operating margins during industrial slowdowns. Three things management said stand out. 1. Data center cooling licensing unlocks infrastructure expansion. Graco partnered with power and automation firm ABB to supply direct-drive electric motor technology for data center cooling systems. The licensing deal allows the business to enter the high-density artificial intelligence infrastructure market without heavy capital outlays. By combining ABB's global scale, customer relationships and manufacturing capabilities with ETM's differentiated technology, The Motley Fool, LLC has a unique opportunity to create value in a large and growing market while further demonstrating the long-term potential of the ETM platform. - Mark Sheahan, President and Chief Executive Officer 2. Valco Melton acquisition offers operational margin upside. The company acquired adhesive equipment maker Valco Melton to grow precision dispensing capabilities. Leadership expects to increase the new unit's EBITDA (earnings before interest, taxes, depreciation, and amortization) through cross-selling and supply chain integration. The Motley Fool, LLC is targeting expansion of Valco Melton's EBITDA margin from the high teens to the mid-20% range within 3 years of closing. - Mark Sheahan, President and Chief Executive Officer 3. Growing order backlog buffers industrial capital delays. Industrial clients are delaying large equipment purchases, but overall order volume continues to outpace shipments. That accumulation of unfulfilled orders gives management financial visibility despite uneven macroeconomic conditions. Backlog as of October 16, excluding acquisitions, increased $51 million or 18% from the beginning of the year. - Mark Sheahan, President and Chief Executive Officer Looking ahead. Demand in contractor paint equipment and semiconductor markets remains steady. That stability provides management breathing room as industrial decision cycles stretch out. I think The Motley Fool, LLC is cautiously optimistic that as The Motley Fool, LLC close out the year that the overall demand trends remain intact, and The Motley Fool, LLC'll see some growth in Contractor in Q4. - Mark Sheahan, President and Chief Executive Officer A positive net cash position allows continuous reinvestment in high-growth niches alongside steady share repurchases and dividends. The Motley Fool, LLC remain well positioned to invest in strategic growth opportunities while maintaining a disciplined approach to capital allocation and long-term shareholder value creation. - Sanjiv Gupta, Chief Financial Officer and Treasurer Should you buy stock in Graco right now? Before you buy stock in Graco, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Graco wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of its recommendation, you'd have $361,596!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of its recommendation, you'd have $1,303,935!* Now, it's worth noting Stock Advisor's total average return is 910% - a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. *Stock Advisor returns as of October 24, 2026.

What Graco (GGG) said on its Q3 earnings call. Graco (NYSE:GGG) reported record third-quarter fiscal 2026 sales of $586 million, up 8% from a year earlier and including 4% organic growth, as all three operating segments and reportable regions contributed to growth. Management said incoming organic orders rose 7% during the quarter and 4% year to date, while backlog excluding acquisitions increased $51 million, or 18%, from the beginning of the year through Oct. 16. Adjusted operating earnings totaled $161 million, while adjusted earnings per share increased 5% to $0.81. Adjusted operating margin was 27% of sales, down nearly 180 basis points from the prior-year quarter, largely due to product and channel mix, including a higher mix of powder finishing systems. CEO Mark Sheahan said the company's fourth-quarter revenue outlook is $610 million to $640 million, based on current order trends and backlog. He cautioned that demand conditions vary by market and that timing of larger projects can shift revenue between periods. Order activity and segment performance. Graco said third-quarter organic revenue, excluding the recently acquired Valco Melton business, finished slightly below the company's prior guidance range of $580 million to $600 million. CFO Sanjiv Gupta attributed the shortfall primarily to the Industrial segment, where larger capital projects faced longer decision cycles and some projects were delayed or pushed out. Gupta said the company was not seeing broad-based demand deterioration, citing order activity. He added that Graco's fourth-quarter outlook does not assume an acceleration in demand. * Contractor: Sales rose 5%, including acquisitions, and organic sales increased 2%. Growth occurred across regions and was led by professional paint sales in the Americas. Sheahan said adoption of products including QuickShot II and ProReach supported sell-through in key channels. Segment bookings increased 7% in the quarter and 2% year to date. * Industrial: Sales increased 11%, supported by the core business and acquisitions. Growth was led by project activity in powder finishing systems, while maintenance and repair spending remained strong. Graco also cited greater adoption of QUANTM electric pumps and continued automatic lubrication growth. Year-to-date bookings rose 1%. * Expansion Markets: Sales rose 8%. Semiconductor posted its strongest quarterly revenue in several years as customers invested in advanced manufacturing capacity and more complex production processes. Environmental sales also grew by double digits. Segment bookings increased 62% in the quarter and 44% year to date. Sheahan said Contractor's underlying activity remained positive despite the residential housing backdrop, with commercial activity, infrastructure-related work, protective coatings and foam applications contributing to momentum. The home-center channel was down slightly during the quarter, he said, but management did not identify a fundamental change in that channel. Within Industrial, management said broader conditions remained somewhat sluggish, particularly for larger capital projects. However, Sheahan said bookings improved during the latter part of the third quarter and that the improvement had continued into the fourth quarter. Gupta said Industrial growth in the third quarter was spread across geographies, though it was more subdued in the U.S. Valco Melton integration and margins. During the quarter, Graco completed its acquisition of Valco Melton, adding precision adhesive dispensing and quality-assurance capabilities. Management said its integration priorities include cross-selling through complementary customer relationships and channels, leveraging procurement and manufacturing capabilities, and maintaining customer service and business momentum. Graco is targeting expansion of Valco Melton's EBITDA margin from the high teens to the mid-20% range within three years of the acquisition's closing. Sheahan said Valco Melton sells directly to customers and has an established direct sales organization, but he did not see structural factors that would prevent its long-term margin profile from approaching that of Graco's general industrial businesses. Contractor operating earnings rose 5% to $71 million, with margins stable year over year. Excluding Valco Melton and related costs, Industrial operating earnings were flat at $74 million, while the segment's margin declined by nearly one percentage point due primarily to product and channel mix. Expansion Markets operating earnings increased 5% to $11 million, aided by semiconductor strength but facing a comparison that included a prior-year upfront license fee related to an electric motor application. Management said realized pricing offset higher net input costs during the quarter. Price-cost was flat, and Sheahan said he expected that relationship to remain broadly similar in the fourth quarter. ABB technology agreement and capital allocation. Sheahan also highlighted a newly announced technology agreement between Graco's ETM business and ABB. Under the agreement, ABB will license ETM's patented transverse flux motor technology for data-center cooling towers, heat-rejection systems and related thermal-management applications. The companies are targeting their first data-center installations by the end of 2029. Sheahan said ABB is expected to begin launching Graco motor technology into other applications, including conveyor systems and factories, next year under a separate licensing agreement announced previously. Year-to-date operating cash flow was $463 million, equal to 116% of adjusted net earnings. Graco repurchased $467 million of shares, paid $145 million in dividends, invested $436 million in acquisitions net of cash acquired, and spent $48 million on capital expenditures. Gupta said the company maintained a slightly positive net cash position despite those investments. Management said it intends to maintain a balanced capital-allocation approach, combining share repurchases with acquisitions. Sheahan said the acquisition pipeline includes more businesses in faster-growing end markets than it did several years ago, citing semiconductor and water and wastewater management as areas of focus. About Graco (NYSE:GGG). Graco Inc is a global manufacturer of equipment used to move, measure, control, dispense and apply fluids and other materials. Its products are used in industrial, commercial and residential applications involving paints, coatings, sealants, adhesives, lubricants, chemicals and other fluids. The company's product portfolio includes pumps, valves, meters, regulators, fluid-management systems, lubrication equipment, spray-applied coating and finishing systems, sealant and adhesive equipment, and contractor-oriented painting and texture application tools.