Gorman-Rupp (NYSE:GRC) Reports Q4 In Line With Expectations
Gorman-Rupp (NYSE:GRC) manufactures and sells pumps globally. met Wall Street’s revenue expectations in Q4 CY2024, with sales up 1.3% year on year to $162.7 million. Its non-GAAP profit of $0.42 per share was 6.7% below analysts’ consensus estimates.
Revenue: $162.7 million vs analyst estimates of $162.8 million (1.3% year-on-year growth, in line)
Adjusted EPS: $0.42 vs analyst expectations of $0.45 (6.7% miss)
Adjusted EBITDA: $29 million vs analyst estimates of $29.13 million (17.8% margin, in line)
Operating Margin: 13%, in line with the same quarter last year
Free Cash Flow Margin: 3.2%, down from 14.1% in the same quarter last year
Backlog: $206 million at quarter end
Market Capitalization: $991.4 million
Scott A. King, President and CEO, commented, “We are pleased that we achieved an improvement in gross margin and operating income in 2024, as well as a 28% increase in adjusted earnings per share for the year. We also reduced our debt by $43 million, which along with our refinancing in the second quarter of 2024, resulted in a significant reduction in interest expense and positions us well to further reduce our debt and interest expense going forward. In addition to our strong operating results, we were proud to increase our dividend for the 52nd consecutive year, and in January of 2025 we declared our 300th consecutive quarterly dividend, marking 75 years of continued dividends. As we begin 2025 our outlook remains positive. While sales were less than expected in 2024, we continued to see strong incoming orders during the year and ended the year with healthy backlog to begin the new year. As demonstrated by our increase in municipal sales in 2024, we remain well positioned to continue to benefit from infrastructure spending and the strong demand for flood control and storm water management. We remain focused on delivering long-term profitable growth.
Company Overview
Powering fluid dynamics since 1934, Gorman-Rupp (NYSE:GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.
Gas and Liquid Handling
Gas and liquid handling companies possess the technical know-how and specialized equipment to handle valuable (and sometimes dangerous) substances. Lately, water conservation and carbon capture–which requires hydrogen and other gasses as well as specialized infrastructure–have been trending up, creating new demand for products such as filters, pumps, and valves. On the other hand, gas and liquid handling companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Gorman-Rupp’s sales grew at an impressive 10.6% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
Gorman-Rupp Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Gorman-Rupp’s annualized revenue growth of 12.5% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.
Gorman-Rupp Year-On-Year Revenue Growth
This quarter, Gorman-Rupp grew its revenue by 1.3% year on year, and its $162.7 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Operating Margin
Gorman-Rupp has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11.3%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, Gorman-Rupp’s operating margin rose by 4.8 percentage points over the last five years, as its sales growth gave it operating leverage.
In Q4, Gorman-Rupp generated an operating profit margin of 13%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Gorman-Rupp’s EPS grew at an unimpressive 5% compounded annual growth rate over the last five years, lower than its 10.6% annualized revenue growth. However, its operating margin actually expanded during this time, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.
Gorman-Rupp Trailing 12-Month EPS (Non-GAAP)
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
Gorman-Rupp’s two-year annual EPS growth of 34.3% was fantastic and topped its 12.5% two-year revenue growth.
In Q4, Gorman-Rupp reported EPS at $0.42, up from $0.34 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Gorman-Rupp’s full-year EPS of $1.75 to grow 13.7%.
Key Takeaways from Gorman-Rupp’s Q4 Results
This was a quarter without many surprises, as revenue and EBITDA were in line with Wall Street's expectations. The stock traded up 2.6% to $38.80 immediately after reporting.
