Graco CEO on data center buildout, AI infrastructure play

>> ALL RIGHT, THE ANSWER TO OUR RIDDLE BEFORE THE BREAK IS GRECO. THE TICKER IS TRIPLE G. G G G. NOW, IT MAY NOT BE A HOUSEHOLD NAME. THIS IS NOT THE BABY STROLLER COMPANY. BUT WHAT THEY BUILT GOES INTO SO MANY OTHER THINGS THAT YOU SEE OR USE EVERY DAY, INCLUDING, YOU GUESSED IT, PART OF THE DATA CENTER SUPPLY CHAIN. SO HOW COME INVESTORS AREN'T GIVING GRECO A LITTLE MORE LOVE? JOINING US NOW IS MARK SHEEHAN. HE IS THE CEO OF GRECO. MARK REALLY A PLEASURE TO HAVE YOU ON CNBC. YOU KNOW AGAIN NOT THE STROLLER COMPANY. YOU GUYS ARE IN PARTS OF THE AI SUPPLY CHAIN MOSTLY THROUGH CONSTRUCTION AND PAINT AND THINGS LIKE THAT. PLAIN ENGLISH. WHERE DO YOU FALL IN THE AMERICAN INDUSTRIAL ECOSYSTEM? >> YEAH WE ARE WE'RE AT THE CENTER OF IT BECAUSE A LOT OF THIS BUILD OUT THAT'S HAPPENING, AI DATA CENTERS, THEY HAVE TO BUILD BUILDINGS, RIGHT? SO ALL THIS CONSTRUCTION THAT'S HAPPENING GIVES OUR CUSTOMERS THE OPPORTUNITY TO COME IN AND DO WORK. SO IF YOU THINK ABOUT BUILDING GOING UP, LIKE THEY'RE GOING TO PAINT THE OUTSIDE OF THE BUILDING, ONCE THEY GET IN, THEY'RE GOING TO DO THE INSIDE OF THE BUILDING. THEY HAVE TO PUT FLOORS INTO THE BUILDING. AND WE HAVE CODING MATERIALS THAT GO ON TO THOSE FLOORS, THE GIRDERS THAT SUPPORT THE BUILDING. WE MAKE EQUIPMENT THAT DOES WHAT'S CALLED INTUMESCENT FIREPROOFING. SO IT GIVES PEOPLE INSIDE OF THE BUILDING MORE TIME TO GET OUT. IF THE IF THE GIRDERS ARE CORDED WITH INTERMITTENT COATINGS. SO WE'RE THERE AS WELL. WE DO ROOFING MATERIALS. WE DO THE PARKING LOTS. WE PUT THE LINE STRIPES ON THE. >> IT'S BORING. >> BUT OH MY GOSH. >> SO EVERYTHING IS THERE. YEAH. >> IT'S NECESSARY. THIS IS ALL THE STUFF THAT MAKES THE WORLD WORK. AND I DON'T KNOW IF YOU SAW THE TOP OF THE SHOW. WE HAD ONE OF OUR GUESTS WAS SAYING, LISTEN, HE ACTUALLY DROPPED THE INDUSTRIALS. I MENTIONED YOU BECAUSE HE WAS LIKE, THEY'RE GETTING NO LOVE. YOU'RE OPERATING. EARNINGS ARE UP 11% YEAR OVER YEAR. SOME OF THAT WAS TARIFF REFUNDS. I GET THAT YOU'RE OPERATING MARGINS ARE AMONG THE HIGHEST IN THE BUSINESS. AND YET THE THE WALL STREET AVERAGE PRICE TARGET IS LIKE 93 AND CHANGE. YOU'RE NOT THERE. YOU'RE AT 77 ISH. WHAT ARE INVESTORS OR THE MARKET MISSING HERE? >> YEAH, I THINK THAT WE'RE NOT THE SHINY OBJECT RIGHT NOW. AND WE THINK THAT'S A BIG SHINY. WE DO. WE'VE BEEN AROUND FOR 100 YEARS. WE JUST WE HAVE THE SAME PLAYBOOK. WE'RE ALWAYS INNOVATING. WE'RE ALWAYS LAUNCHING PRODUCTS. WE DO GENERATE VERY HIGH RATES OF RETURN ON OUR SALES. WE DO GET, I THINK LIKE 23% NET AFTER TAX, OPERATING PROFIT MARGINS, AFTER PAYING TAXES. THAT'S WHAT WE THAT'S WHAT WE GET. SO IF YOU IF YOU LOOK AT THE FREE CASH FLOW OF THE COMPANY OVER THE LAST FIVE YEARS, IT'S ACTUALLY DOUBLED. YET THE STOCK HASN'T. AND I THINK IT'S JUST A MATTER OF TIME. WHEN YOU'VE BEEN AROUND FOR 100 YEARS, YOU KIND OF KNOW THERE'S GOOD TIMES, BAD TIMES, THINGS WHEN YOU'RE IN FAVOR, THINGS WHEN YOU'RE NOT IN FAVOR. WE JUST KEEP DOING WHAT WE DO REALLY WELL. AND IT'S THAT'S WORK FOR US. >> SORRY, I DIDN'T MEAN TO INTERRUPT YOU THERE. I'M JUST THINKING ABOUT WHAT YOU SAID ABOUT BUILDING OUT THESE THESE LITERAL EDIFICES, THESE BUILDINGS FOR DATA CENTERS. AND AT A TIME WHEN INVESTORS ARE SEARCHING UNDER EVERY ROCK FOR WHAT'S A DATA CENTER PLAY? I DON'T KNOW IF YOU WANT TO GET CAUGHT UP IN THAT CRAZE. I DON'T KNOW WHY. WHY IS LUMENTUM UP HUNDREDS OF PERCENTAGES AND YOU GUYS AREN'T. MAYBE THEY CAN DEPLOY, BUT YOU'RE FUNDAMENTALLY DOING THE SAME THING, AREN'T YOU? YOU'RE YOU'RE DEPLOYING, YOU KNOW, YOUR PRODUCT INTO THESE DATA CENTERS. >> YEAH, I THINK, I THINK THE DIFFERENCE WITH US IS THAT IT'S PART OF OUR PORTFOLIO, BUT IT ISN'T LIKE THE MAJOR THRUST OF OUR PORTFOLIO. SO IF YOU BUY A STOCK, YOU'RE BUYING A DIVERSIFIED INDUSTRIAL MANUFACTURER THAT HAS EXPOSURE TO A LOT OF DIFFERENT END MARKETS, DATA CENTER BEING ONE OF THEM. WE ALSO HAVE A BUSINESS WHERE WE MAKE HIGH PURITY PUMPS THAT ARE USED TO PRODUCE COMPUTER CHIPS. AND SO WE SELL TO CUSTOMERS LIKE LAM RESEARCH AND APPLIED MATERIALS, AND THEN THEY CREATE THE MACHINES THAT GO INTO THE FABS AND THE FABS CREATE THE THE CHIPS THEMSELVES. >> BUT TO YOUR POINT, YOU'RE ALSO EXPOSED TO INFRASTRUCTURE, YOU'RE EXPOSED TO AUTO, YOU'RE IN THE OREO FILLING. >> WE ARE. >> EVERYWHERE TO, TO MA. I MEAN, LIKE I SEE YOUR POINT THAT LIKE WHEN YOU'RE, YOU KNOW, THAT DIVERSIFIED, IT'S NOT LIKE YOU'RE JUST A PLAY ON ANY ONE PARTICULAR THING. >> YEAH. THAT'S RIGHT. I MEAN, LIKE WHEN YOUR CAR WAS LIKELY PAINTED WITH GRAY PUMPS THAT PUMP THE PAINT OUT TO THE LINE THAT GOT THE CAR PAINTED YOUR, THE WINDSHIELD WAS PROBABLY GLUED IN WITH GRAY GHOST SYSTEMS AS WELL. THE WATER TOWERS THAT YOU DRIVE BY, THE TWO COMPONENT MATERIALS THAT GO ON THOSE WATER TOWERS. WE HAVE EQUIPMENT THAT DOES THAT. AND THEN LIKE YOU SAID, YOU GO INTO THE GROCERY STORE, PEANUT BUTTER, SHAMPOO, TOMATO PASTE, ALL THAT STUFF IS PUMPED WITH. >> AND BUYBACK BUYBACKS ARE UP. >> YEAH, WE'VE BEEN BUYING BACK STOCK. I THINK WE'VE BETWEEN DIVIDENDS AND SHARE REPURCHASES, WE'VE DONE MORE THAN $1 BILLION IN THE LAST 18 MONTHS, WHICH IS A BIG NUMBER FOR A COMPANY. WE'RE $12 BILLION MARKET CAP BUSINESS, BUT WE GENERATE SO MUCH CASH THAT WE CAN'T INVEST IT ALL BACK IN THE COMPANY. SO WE'VE BEEN BUYING BACK STOCK. WE'VE ALSO BEEN DOING ACQUISITIONS. >> WELL, BASED IN MINNEAPOLIS. YOU GOT A NEW HEADQUARTERS BEING BUILT SLIGHTLY NORTH OF THE CITY, BUT WE'D LOVE TO