Graco: M&A Or Share Buybacks Likely Provide Larger Value Creation Over Time, Says Oppenheimer


In a research report issued today, Oppenheimer analyst Jim Giannakouros upgraded shares of Graco (NYSE:GGG) to Outperform rating and raised his price target to $79 (from $58), which represents a potential upside of 14% from where the stock is currently trading.

Giannakouros noted, “We are upgrading shares to Outperform viewing current valuation accommodative and not fully capturing 1) sustained MSD+ organic growth prospects in NA industrial, commercial, and residential markets, 2) leverage opportunities from NPIs, and 3) sustained margin expansion on improved leverage and acquisition integrations. We acknowledge incremental risks to European operations (organic and FX), and thus have affected our model accordingly with recent acquisition accretion offsetting. Additionally, greater clarity on LF’s divestiture ($590M selling price) providing GGG with ~$5/share in excess cash upon closing should provide upside to our current model and bridges our earnings power valuation (20x P/E) and new $79 price target. We believe M&A and/or share buybacks likely provide larger value creation over time.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jim Giannakouros has a total average return of 0.8% and a 29.4% success rate. Giannakouros has a 63.5% average return when recommending GGG, and is ranked #1906 out of 3340 analysts.

 

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