Graco: 3 Key Takeaways for Long-Term Investors

On its third-quarter 2026 earnings call, held on Oct. 22, 2026, Graco (NYSE:GGG) 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, we have 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.

We're 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 we're cautiously optimistic that as we close out the year that the overall demand trends remain intact, and we'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.

We 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

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