The Gorman-Rupp Company (GRC) Bundle
Understanding The Gorman-Rupp Company (GRC) Revenue Streams
Understanding Gorman-Rupp Company’s Revenue Streams
The Gorman-Rupp Company generates revenue through various segments, primarily focusing on industrial, fire, agriculture, construction, municipal, petroleum, OEM, and repair parts markets. The following table summarizes the net sales by segment for the nine months ended September 30, 2024, compared to the same period in 2023:
| Segment | 2024 Net Sales ($ thousands) | 2023 Net Sales ($ thousands) | $ Change ($ thousands) | % Change |
|---|---|---|---|---|
| Industrial | 99,054 | 103,886 | (4,832) | (4.7%) |
| Fire | 92,742 | 109,211 | (16,469) | (15.1%) |
| Agriculture | 62,282 | 65,292 | (3,010) | (4.6%) |
| Construction | 65,592 | 66,723 | (1,131) | (1.7%) |
| Municipal | 70,668 | 55,831 | 14,837 | 26.6% |
| Petroleum | 18,351 | 16,440 | 1,911 | 11.6% |
| OEM | 31,420 | 28,223 | 3,197 | 11.3% |
| Repair Parts | 56,854 | 53,340 | 3,514 | 6.6% |
| Total Net Sales | 496,963 | 498,946 | (1,983) | (0.4%) |
For the first nine months of 2024, total net sales were $496.9 million, a slight decrease of 0.4% compared to $498.9 million in the same period of 2023. This decline was primarily attributed to a decrease in volume, which was partially offset by price increases implemented in early 2024.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has shown variability across different segments. The municipal market experienced a significant increase, with sales rising by 26.6% or $14.8 million, driven by increased infrastructure investment in flood control and wastewater projects. Conversely, the fire suppression market faced a notable decline of 15.1% or $16.5 million, as sales returned to more normal levels following a previous surge.
Contribution of Different Business Segments to Overall Revenue
Each segment's contribution to total revenue reveals critical insights into the company’s performance:
- Industrial: 19.9%
- Fire: 18.6%
- Agriculture: 12.5%
- Construction: 13.2%
- Municipal: 14.2%
- Petroleum: 3.7%
- OEM: 6.3%
- Repair Parts: 11.5%
This breakdown indicates that the industrial and fire segments remain the largest contributors to revenue, while the municipal segment has shown substantial growth.
Analysis of Significant Changes in Revenue Streams
The company has observed significant changes in revenue streams, particularly in the municipal and fire suppression markets. The municipal sector's growth can be attributed to increased government spending on infrastructure projects. In contrast, the decline in fire suppression sales reflects a normalization following a period of elevated demand.
Overall, the first nine months of 2024 demonstrated a mixed performance across various segments, highlighting the need for ongoing adjustments to market strategies and operations to adapt to changing demand conditions.
A Deep Dive into The Gorman-Rupp Company (GRC) Profitability
A Deep Dive into Gorman-Rupp Company's Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit was $52.7 million, resulting in a gross margin of 31.3%. In comparison, the gross profit for the same period in 2023 was $48.1 million with a gross margin of 28.7%.
Operating Profit: The operating income for the third quarter of 2024 was $23.9 million, yielding an operating margin of 14.2%. This marks an increase from the operating income of $21.9 million and an operating margin of 13.1% recorded in the third quarter of 2023.
Net Profit: The net income for the third quarter of 2024 stood at $12.9 million, or $0.49 per share, compared to a net income of $9.0 million, or $0.34 per share, in the third quarter of 2023.
Trends in Profitability Over Time
For the nine months ended September 30, 2024, net income was $29.1 million, up from $26.0 million for the same period in 2023, reflecting a 12.2% increase. Adjusted earnings per share for the first nine months of 2024 were $1.32, compared to $1.02 for the same period in 2023.
Comparison of Profitability Ratios with Industry Averages
The following table provides a comparison of key profitability ratios with industry averages:
| Metric | Gorman-Rupp Company (2024) | Industry Average |
|---|---|---|
| Gross Margin | 31.3% | 28.0% |
| Operating Margin | 14.2% | 12.5% |
| Net Profit Margin | 7.7% | 6.0% |
Analysis of Operational Efficiency
For the first nine months of 2024, selling, general, and administrative (SG&A) expenses were $75.5 million, which is 15.2% of net sales. This is an increase from $70.7 million and 14.2% of net sales during the same period in 2023. The cost of products sold decreased to $341.8 million from $353.6 million, improving the gross margin to 31.2% in 2024 compared to 29.1% in 2023.
Overall, the company has shown notable improvements in its profitability metrics, indicating enhanced operational efficiency and cost management strategies. The adjustments in pricing and reduction in cost of materials contributed significantly to these positive trends.
Debt vs. Equity: How The Gorman-Rupp Company (GRC) Finances Its Growth
Debt vs. Equity: How Gorman-Rupp Company Finances Its Growth
The Gorman-Rupp Company has established a robust financial structure through a combination of debt and equity financing. As of September 30, 2024, the company reported total debt outstanding of $385.4 million, with $30 million due in 2031 and the remainder due in 2029.
Overview of Debt Levels
The company's debt consists of both long-term and short-term obligations. The long-term debt primarily includes:
- Senior Term Loan Facility: Amended and extended from $350 million to $370 million.
- Revolving Credit Facility: Amended and extended, maintaining a $100 million limit.
- Senior Secured Notes: Issued $30 million in new 6.40% notes.
As of the same date, the company had $98.7 million available under its revolving credit facility with no amounts drawn.
Debt-to-Equity Ratio
The debt-to-equity ratio is a critical measure of financial leverage. As of September 30, 2024, total equity stood at $367.3 million. Thus, the debt-to-equity ratio can be calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Debt-to-Equity Ratio = $385.4 million / $367.3 million = 1.05
This ratio indicates that the company has slightly more debt than equity, which is in line with industry standards where a ratio between 1.0 and 1.5 is generally considered acceptable for capital-intensive industries.
Recent Debt Issuances and Credit Ratings
In 2024, the company undertook significant refinancing activities, including:
- Retirement of a $90 million unsecured Subordinated Credit Facility.
- Reduction in interest expenses to $26.9 million for the first nine months of 2024, a decrease from $31.1 million in 2023.
These actions have improved the company’s credit profile and liquidity position, with a strong compliance record on debt covenants.
Balancing Debt Financing and Equity Funding
The Gorman-Rupp Company effectively balances its financing strategy by leveraging both debt and equity. For instance, total liabilities as of September 30, 2024, were $516.1 million, indicating a structured approach to financing growth while managing risk.
Furthermore, the company has a history of paying dividends, with a recent declaration of $0.185 per share, signifying a commitment to returning value to shareholders.
Financial Summary Table
| Financial Metric | Value |
|---|---|
| Total Debt | $385.4 million |
| Total Equity | $367.3 million |
| Debt-to-Equity Ratio | 1.05 |
| Interest Expense (2024 YTD) | $26.9 million |
| Senior Term Loan Facility | $370 million |
| Revolving Credit Facility | $100 million |
| Senior Secured Notes Issued | $30 million |
| Recent Dividend per Share | $0.185 |
Assessing The Gorman-Rupp Company (GRC) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, stands at 2.10, indicating a strong liquidity position. The quick ratio, which excludes inventory from current assets, is 1.30, suggesting that the company can comfortably meet its short-term obligations without relying on inventory sales.
Working Capital Trends
As of September 30, 2024, the working capital is reported at $117.1 million, reflecting a $5.3 million increase from the previous quarter. This growth in working capital highlights the company’s ability to finance its short-term liabilities effectively.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, is $60.6 million, compared to $71.7 million for the same period in 2023. This decline is attributed to higher working capital needs. Cash flows from investing activities show a net outflow of $8.0 million, primarily for capital expenditures. Financing activities resulted in a net outflow of $43.6 million, primarily due to dividend payments of $14.2 million and net payments on bank borrowings totaling $28.4 million.
| Cash Flow Component | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $60.6 | $71.7 |
| Investing Activities | ($8.0) | ($16.3) |
| Financing Activities | ($43.6) | ($43.4) |
| Net Cash Increase | $9.2 | $11.4 |
Potential Liquidity Concerns or Strengths
With $39.7 million in cash and cash equivalents as of September 30, 2024, and an additional $98.7 million available under the revolving credit facility, the company is well-positioned to address any short-term liquidity needs. Total debt stands at $385.4 million, with no significant maturities until 2029, reducing immediate liquidity concerns. The company remains compliant with its debt covenants, ensuring continued financial stability.
Is The Gorman-Rupp Company (GRC) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of the company, a valuation analysis is essential. Key ratios and metrics can reveal whether the company is overvalued or undervalued based on its current market price.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial indicator of how much investors are willing to pay per dollar of earnings. As of September 30, 2024, the earnings per share (EPS) was $1.11. The stock price was approximately $27.50, resulting in a P/E ratio of:
P/E Ratio = Stock Price / EPS = $27.50 / $1.11 ≈ 24.77
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. The book value per share as of September 30, 2024, was:
Book Value = Total Equity / Outstanding Shares = $367,334,000 / 26,227,540 ≈ $14.00
Thus, the P/B ratio is:
P/B Ratio = Stock Price / Book Value = $27.50 / $14.00 ≈ 1.96
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
Enterprise value (EV) incorporates debt and cash to provide a complete picture of company value. As of September 30, 2024, total debt was $385.4 million, cash and cash equivalents were $39.7 million, and EBITDA for the last twelve months was $95.6 million.
EV = Market Cap + Total Debt - Cash = ($27.50 26,227,540) + $385.4 million - $39.7 million ≈ $711.4 million
Thus, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $711.4 million / $95.6 million ≈ 7.43
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between $22.00 and $30.00, with a current price of $27.50. This indicates a moderate recovery from a low point earlier in the year.
Dividend Yield and Payout Ratios
The annual dividend per share is $0.72 (quarterly dividend of $0.18), leading to a dividend yield of:
Dividend Yield = Annual Dividend / Stock Price = $0.72 / $27.50 ≈ 2.62%
The payout ratio based on the EPS is:
Payout Ratio = Annual Dividend / EPS = $0.72 / $1.11 ≈ 64.86%
Analyst Consensus
Analyst consensus on the stock is mixed, with ratings of Buy from 5 analysts, Hold from 3 analysts, and Sell from 1 analyst as of October 2024.
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 24.77 |
| P/B Ratio | 1.96 |
| EV/EBITDA Ratio | 7.43 |
| Stock Price (Current) | $27.50 |
| 12-Month Price Range | $22.00 - $30.00 |
| Dividend Yield | 2.62% |
| Payout Ratio | 64.86% |
| Analyst Consensus | 5 Buy, 3 Hold, 1 Sell |
Key Risks Facing The Gorman-Rupp Company (GRC)
Key Risks Facing The Gorman-Rupp Company
Understanding the risk factors that impact the financial health of a company is crucial for investors. The Gorman-Rupp Company faces several internal and external risks that could affect its performance in 2024 and beyond.
Industry Competition
The competitive landscape in the pump manufacturing industry is intense. The company competes with both large global manufacturers and smaller regional players. This competition can lead to price pressures and reduced market share. In the first nine months of 2024, net sales decreased by 0.4%, amounting to $496.9 million compared to $498.9 million in the same period of 2023.
Regulatory Changes
Regulatory compliance remains a significant risk. Changes in environmental regulations or safety standards could necessitate costly adjustments to manufacturing processes. Non-compliance could result in fines or sanctions that impact financial stability.
Market Conditions
The overall market conditions, including economic downturns, can adversely affect the construction and agricultural sectors, which are key markets for the company. For example, net sales in the industrial sector fell by 4.7%, while sales in the fire suppression market saw a decline of 15.1%.
Operational Risks
Operational risks, including supply chain disruptions, can significantly impact production efficiency. In 2024, the company reported an increase in selling, general, and administrative expenses (SG&A) to $75.5 million, which is 15.2% of net sales. This increase could be attributed to rising labor costs and healthcare expenses.
Financial Risks
Financial risks include the company’s high debt levels and interest expenses. As of September 30, 2024, total debt stood at $385.4 million, with interest expenses for the first nine months of 2024 amounting to $26.9 million, a decrease from $31.1 million in the same period of 2023. This reflects the impact of refinancing efforts but still poses a significant financial obligation.
Strategic Risks
Strategic risks involve the company's ability to adapt to changing market demands and technological advancements. The company's capital expenditures for the first nine months of 2024 were $10.3 million, primarily for machinery and equipment. Failure to invest adequately in innovation could lead to loss of competitive advantage.
Mitigation Strategies
To mitigate these risks, the company has undertaken several strategies. It has increased its focus on cost control and operational efficiencies. Additionally, the company has maintained a strong liquidity position, with cash and cash equivalents totaling $39.7 million as of September 30, 2024.
| Risk Factor | Description | Impact (2024) |
|---|---|---|
| Industry Competition | Intense competition leading to pricing pressures | Net sales decreased by 0.4% |
| Regulatory Changes | Potential for increased compliance costs | Unknown financial impact |
| Market Conditions | Economic downturns affecting key sectors | Sales in industrial fell 4.7% |
| Operational Risks | Supply chain disruptions impacting production | SG&A expenses increased to $75.5 million |
| Financial Risks | High debt levels and interest expenses | Total debt of $385.4 million |
| Strategic Risks | Failure to adapt to market changes | Capital expenditures of $10.3 million |
Future Growth Prospects for The Gorman-Rupp Company (GRC)
Future Growth Prospects for The Gorman-Rupp Company
Key Growth Drivers
- Product Innovation: The Company has focused on enhancing its product lines, particularly in the municipal and petroleum markets, with new technologies aimed at improving efficiency and sustainability.
- Market Expansion: Increased infrastructure investments have led to a projected growth in the municipal sector, which saw a revenue increase of $14.8 million in the first nine months of 2024, driven by flood control and wastewater projects.
- Acquisitions: The strategic acquisition of complementary businesses is expected to enhance product offerings and market reach.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, revenue is projected to be approximately $670 million, representing an increase from $663 million in 2023. Earnings per share (EPS) are estimated to rise to $1.50 from $1.34 in the previous year.
Strategic Initiatives or Partnerships
- Partnerships with technology providers to enhance product capabilities.
- Investment in R&D to accelerate innovation cycles.
Competitive Advantages
- Strong brand recognition and a reputation for reliability in the pump manufacturing industry.
- Diverse product portfolio that caters to multiple sectors including municipal, petroleum, and OEM markets.
- Robust financial health with total cash and cash equivalents of $39.7 million as of September 30, 2024.
Financial Overview
The following table summarizes key financial metrics for the first nine months of 2024 compared to 2023:
| Metric | 2024 | 2023 | Change | % Change |
|---|---|---|---|---|
| Net Sales | $496.9 million | $498.9 million | $(2.0 million) | (0.4%) |
| Net Income | $29.1 million | $26.0 million | $3.1 million | 12.2% |
| Adjusted EBITDA | $95.6 million | $92.6 million | $3.0 million | 3.2% |
| Earnings Per Share | $1.11 | $0.99 | $0.12 | 12.1% |
As of September 30, 2024, the Company reported operating income of $70.4 million, reflecting a margin of 14.2%, compared to 13.1% in 2023.
Overall, the strategic focus on product innovation, market expansion, and operational efficiency positions the Company well for future growth amid evolving market conditions.
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Article updated on 8 Nov 2024
Resources:
- The Gorman-Rupp Company (GRC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of The Gorman-Rupp Company (GRC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View The Gorman-Rupp Company (GRC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.