Oct 22, 2026 earnings call — ABB license deal for ETM motor technology
Graco reported record sales of $586 million, an increase of 8% compared to last year, including organic growth of 4%.
Revenue $0.6B (est $0.6B) · EPS $0.81 (est $0.83) · Next-quarter revenue outlook $0.6B–$0.6B
Key quotes
"Under this agreement, ABB will license ETM's patented Transverse Flux Motor technology for use in data center cooling towers, heat rejection systems and related thermal management applications."
"Backlog as of October 16, excluding acquisitions, increased $51 million or 18% from the beginning of the year."
"We're targeting expansion of Valco Melton's EBITDA margin from the high teens to the mid-20% range within 3 years of closing."
Analyst Q&A 5
Contractor and Industrial demand trends
Q (Michael Halloran · Baird): He asked for detail on contractor channels, foam, and any slowing in subareas. He also asked how Industrial subareas are tracking and whether any parts are accelerating or decelerating into Q4.
A: They said Contractor was upbeat in Q3, with organic growth for 2 quarters, growth driven by the pro paint channel and gains across regions, and they did not see residential market deterioration. For Industrial they said the top line was up 11% growth from underlying businesses and M&A, powder finishing and legacy maintenance helped, bookings are up about 1% year-to-date, and bookings strengthened late in the quarter.
"I would say that the top line, pretty strong performance, up 11% growth, both from underlying businesses and M&A." — Mark Sheahan (CEO)
Q4 guide, pipeline, M&A vs buybacks
Q (Bryan Blair · Oppenheimer): He asked what is baked into the Q4 guide for each big segment and why growth moderates in Q4. He also asked how the current M&A pipeline compares to prior years and how they are choosing between M&A and buybacks.
A: They said the headline outlook is a little bit softer than before, but there is no clear deterioration in underlying demand and they are being cautious because the business is short-cycle. They said Contractor saw organic acceleration in Q2 and Q3 while legacy Industrial remains sluggish with bookings up 1% year-to-date, and those views fed into the Q4 guide. On capital allocation, they said they will be balanced: they plan to buy stock and also pursue a focused M&A pipeline in faster-growing end markets like semiconductor and water management.
"So I think on the capital allocation, we're going to be very similar to what we have been doing, pretty balanced between returning cash to the shareholders through buybacks." — Sanjiv Gupta (CFO)
Price-cost and ABB milestones
Q (Mitchell Moore · KeyBanc): He asked what the overall price versus cost result was in the quarter and the outlook. He also asked what interim milestones to expect for ABB installations and whether more will come before the target date.
A: They said price cost was flat in the quarter and they expect Q4 to be similar given only 13 weeks remain. On ABB, they said this is a long-term strategic relationship, they do not expect many interim installations but will call them out if they occur, and ABB will launch some of their motors next year into conveyor and factory applications.
"Price cost was flat in the quarter for us." — Mark Sheahan (CEO)
Industrial bookings, Valco margins, home center
Q (Matt Summerville · D.A. Davidson): He asked for geographic and end-market detail on Industrial bookings and then asked whether Valco Melton has a different margin profile than core Graco and about the home center channel in Contractor.
A: They said they sell through third-party channels so granular data is limited, but generally there are no major differences across product categories or geographies and volumes are roughly flat to up year-to-date. They said Q3 Industrial growth was broadly healthy across geographies but a bit more subdued in the U.S., and their outlook assumes continued delay in capital activity so baseline orders stay at current levels. On Valco, they said it's a short-term work program to lift margins toward a 3-year target, and they do not see a meaningful structural reason for its long-term margin profile to be dramatically different from Graco; on home centers they said it wasn't a great quarter and may have been down a little, while overall Contractor results were good.
"I would say, generally speaking, across the board, there aren't any significant major differences in the different product categories that we have in the industrial business, and I would say for the geographic as well." — Mark Sheahan (CEO)
Valco dilution, corporate and interest costs
Q (Andrew Buscaglia · BNP Paribas): He asked how much Valco dilutes Industrial margins and whether 2027 Industrial margins will be under 30%. He also asked about unallocated corporate expense and interest expense going forward.
A: They said excluding Valco, Industrial margins were 33% and period-over-period were down only 100 basis points mainly due to mix in Powder Finishing Systems. They described Valco as currently a high teens EBITDA margin business that they expect to expand toward mid-20s over a 3-year period, and they noted one-time costs made the quarter noisier. On corporate and interest, they said they have not given a guide for unallocated corporate (it might go up a little and is largely stock compensation), and interest expense will rise now that they have about $135 million of debt and $140 million of cash as interest income shifts to interest cost.
"I think we called it out, I think excluding Valco, the industrial margins were 33%." — Sanjiv Gupta (CFO)