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Why Is Generac Holdings (GNRC) Up 2.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Generac Holdings (GNRC - Free Report) . Shares have added about 2.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Generac Holdings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Generac Q4 Earnings Beat Estimates, Revenues Up Y/Y
Generac reported fourth-quarter 2021 adjusted earnings of $2.51 per share, up 18.4% year over year and beating the Zacks Consensus Estimate of $2.38.
Net sales increased 40% year over year and came in at $1.07 billion and beat the consensus mark by 4.5%. Robust demand for Residential and Commercial & Industrial (C&I) products, continued capacity-expansion efforts and effective M&A strategies boosted Generac’s fourth-quarter performance.
In the quarter under review, Core sales growth (excludes the impact of acquisitions and foreign currency) increased 35% year over year.
For the full year, the company reported net sales of $3.74 billion, up 50% on a year-over-year basis. Adjusted earnings came in at $9.63 per share compared with $6.47 reported in the prior year.
Quarter in Details
Segment-wise, Domestic revenues increased 39% year over year to $896.4 million, driven by the impact of acquisitions that contributed nearly 2% to revenues. Higher demand for home standby generators and PWRcell energy storage systems coupled with strength across C&I products acted as key drivers for core sales growth.
International revenues rose 47% to $170.7 million, driven by a rebound in end-market activity across all regions compared with COVID-19 lows last year. The impact of acquisitions and forex contributed nearly 21% to revenues.
Product-wise, revenues from Residential soared 42% to $706 million. Revenues from C&I were $284 million, up 43% from the year-ago quarter’s levels. Revenues from the Other product class came in at $77.3 million, up 21% year over year.
Margins
Gross profit was $362 million, up from $300.2 million with respective margins of 34% and 39.4%. The gross profit margin declined as a result of higher input costs related to supply chain disruptions.
Operating expenses were $187.1 million, up 44.8% from the prior-year quarter’s levels. This was due to higher variable expenses from an increase in sales volumes, a rise in marketing and employee costs and the impact of acquisitions.
Operating income came in at $175.5 million, up 2.6%. Adjusted EBITDA was $220 million compared with $196 million in the year-ago quarter, driven by significant revenue growth.
Cash Flow & Liquidity
In 2021, the company generated $411 million of net cash from operating activities compared with $487 million in the prior year. Free cash flow in 2021 came in at $306 million compared with $427 million in 2020. As of Dec 31, 2021, the company had $147.4 million in cash and cash equivalents with $902.1 million of long-term borrowings and finance lease obligations.
Generac repurchased 350,000 shares for $126 million in the quarter under review. As of Dec 31, 2021, the company has $124 million shares remaining under existing share repurchase program.
2022 Outlook
For 2022, Generac expects revenue growth (on a reported basis) between 32% and 36% year over year, which includes net impact between 5% and 7% from acquisitions and foreign currency changes. The company continues to experience a robust demand environment, especially in clean energy markets and for C&I products. Ramping of home standby generators’ production capacity and synergies from acquisitions is also expected to drive the top line. Net income margin (before deducting for non-controlling interests) is expected to be 13-14%. The adjusted EBITDA margin is estimated in the range of 22-23%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -22.17% due to these changes.
VGM Scores
At this time, Generac Holdings has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Generac Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Generac Holdings (GNRC) Up 2.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Generac Holdings (GNRC - Free Report) . Shares have added about 2.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Generac Holdings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Generac Q4 Earnings Beat Estimates, Revenues Up Y/Y
Generac reported fourth-quarter 2021 adjusted earnings of $2.51 per share, up 18.4% year over year and beating the Zacks Consensus Estimate of $2.38.
Net sales increased 40% year over year and came in at $1.07 billion and beat the consensus mark by 4.5%. Robust demand for Residential and Commercial & Industrial (C&I) products, continued capacity-expansion efforts and effective M&A strategies boosted Generac’s fourth-quarter performance.
In the quarter under review, Core sales growth (excludes the impact of acquisitions and foreign currency) increased 35% year over year.
For the full year, the company reported net sales of $3.74 billion, up 50% on a year-over-year basis. Adjusted earnings came in at $9.63 per share compared with $6.47 reported in the prior year.
Quarter in Details
Segment-wise, Domestic revenues increased 39% year over year to $896.4 million, driven by the impact of acquisitions that contributed nearly 2% to revenues. Higher demand for home standby generators and PWRcell energy storage systems coupled with strength across C&I products acted as key drivers for core sales growth.
International revenues rose 47% to $170.7 million, driven by a rebound in end-market activity across all regions compared with COVID-19 lows last year. The impact of acquisitions and forex contributed nearly 21% to revenues.
Product-wise, revenues from Residential soared 42% to $706 million. Revenues from C&I were $284 million, up 43% from the year-ago quarter’s levels. Revenues from the Other product class came in at $77.3 million, up 21% year over year.
Margins
Gross profit was $362 million, up from $300.2 million with respective margins of 34% and 39.4%. The gross profit margin declined as a result of higher input costs related to supply chain disruptions.
Operating expenses were $187.1 million, up 44.8% from the prior-year quarter’s levels. This was due to higher variable expenses from an increase in sales volumes, a rise in marketing and employee costs and the impact of acquisitions.
Operating income came in at $175.5 million, up 2.6%. Adjusted EBITDA was $220 million compared with $196 million in the year-ago quarter, driven by significant revenue growth.
Cash Flow & Liquidity
In 2021, the company generated $411 million of net cash from operating activities compared with $487 million in the prior year. Free cash flow in 2021 came in at $306 million compared with $427 million in 2020. As of Dec 31, 2021, the company had $147.4 million in cash and cash equivalents with $902.1 million of long-term borrowings and finance lease obligations.
Generac repurchased 350,000 shares for $126 million in the quarter under review. As of Dec 31, 2021, the company has $124 million shares remaining under existing share repurchase program.
2022 Outlook
For 2022, Generac expects revenue growth (on a reported basis) between 32% and 36% year over year, which includes net impact between 5% and 7% from acquisitions and foreign currency changes. The company continues to experience a robust demand environment, especially in clean energy markets and for C&I products. Ramping of home standby generators’ production capacity and synergies from acquisitions is also expected to drive the top line. Net income margin (before deducting for non-controlling interests) is expected to be 13-14%. The adjusted EBITDA margin is estimated in the range of 22-23%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -22.17% due to these changes.
VGM Scores
At this time, Generac Holdings has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Generac Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.