UPDATE: Oppenheimer Downgrades Graco on Multiple Negative Factors
In a report published Monday, Oppenheimer analyst Jim Giannakouros downgraded the rating on Graco (NYSE: GGG) from Outperform to Perform, and removed the $76.00 price target.
In the report, Oppenheimer noted, “GGG has been a favored name in our coverage since we upgraded on 8/10/12 (at $48.73), and we expect operational execution and US res/non-res construction volume leverage to continue to support results. That said, we are downgrading shares to Perform from Outperform given: 1) earnings upside opportunities appear constrained in the intermediate term, particularly as GGG sells LF (timing remains uncertain) and is charged with redeploying related capital; 2) Industrial segment margin potential above 35% is a stretch for even a best-in-class company; 3) Contractor segment sales comparisons become more challenging going forward; and 4) valuation (23x forward P/E, 13x (fwd) EV/EBITDA) provides little room for upside, in our view, after material outperformance since August 2012 (+59% vs. S&P +25%).”
Graco closed on Friday at $77.32.
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