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Generac Holdings (GNRC) Up 6.5% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Generac Holdings (GNRC - Free Report) . Shares have added about 6.5% 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's Q2 Earnings Surpass Estimates
Generac reported second-quarter 2024 adjusted earnings per share (EPS) of $1.35, which beat the Zacks Consensus Estimate of $1.24. The company reported adjusted EPS of $1.08 in the prior-year period.
Net sales came in at $998 million compared with $1 billion in the prior-year quarter. The figure also missed the consensus estimate by 0.5%. The decline in Commercial & Industrial (“C&I”) product sales offset an increase in Residential product sales.
In the quarter under review, core sales growth (excluding the impact of acquisitions and foreign currency) was flat year over year.
Generac also highlighted that the company has agreed to increase its minority interest with an additional $35 million investment and further develop its commercial relationship with Wallbox. Wallbox is a prominent smart electric vehicle charging and energy management company. In December 2023, Generac made a minority investment in the company.
Generac updated its sales expectations for 2024 owing to recent power outage activity, including the impact of Hurricane Beryl.
For 2024, it now expects revenues to increase 4-8% compared with the earlier guidance of 3-7%.
Net income margin (before deducting for non-controlling interests) is now anticipated between 6.5% and 7.5% compared with the earlier guided range of 6-7%.
Adjusted EBITDA margin is estimated to be 17-18% compared with the previous guidance of 16.5-17.5%.
Quarter in Details
Segment-wise, Domestic revenues increased 1% year over year to $827.1 million. Results were aided by increased shipments of home standby and portable generators and higher C&I product sales to industrial distributors. This was mostly offset by reduced C&I shipments to telecom and national rental equipment clients.
International revenues fell 18% year over year to $184.5 million. However, favorable foreign currency movement provided a slight positive impact. Core revenues declined due to weak inter-segment sales (owing to softness in the telecom market) and reduced portable generator shipments in Europe.
Product-wise, revenues from Residential inched up 8% year over year to $538 million. C&I revenues totaled $344 million, down 10% year over year. Revenues from the Other product class totaled $115.6 million, down 1.6% year over year.
The Zacks Consensus Estimate for Residential and C&I products’ second-quarter revenues was pegged at $542 million and $338 million, respectively.
Margins
Gross profit was $375.6 million, up from $328.4 million in the prior-year quarter, with respective margins of 37.6% and 32.8%. Gross profit margin performance gained from a favorable sales mix and lower input expenses.
Total operating expenses were $272.3 million, up 12.3% year over year, due to higher employee costs and marketing spending.
Operating income came in at $103.2 million, up 20% year over year. Adjusted EBITDA, before deducting for non-controlling interests, was $165 million compared with $137 million a year ago.
Cash Flow & Liquidity
In the second quarter, the company generated $78 million of net cash from operating activities. Free cash flow totaled $50 million.
As of Jun 30, 2024, Generac had $218.3 million of cash and cash equivalents, with nearly $1.445 billion of long-term borrowings and finance lease obligations.
In the reported quarter, the company repurchased shares worth $51 million. GNRC had shares worth $449 left under its buyback authorization as of Jun 30, 2024.
In February 2024, management approved a new share buyback authorization that allows for a repurchase of up to $500 million in the next 24 months. It replaced the remaining balance on the earlier program.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Generac Holdings has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. 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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Generac Holdings (GNRC) Up 6.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Generac Holdings (GNRC - Free Report) . Shares have added about 6.5% 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's Q2 Earnings Surpass Estimates
Generac reported second-quarter 2024 adjusted earnings per share (EPS) of $1.35, which beat the Zacks Consensus Estimate of $1.24. The company reported adjusted EPS of $1.08 in the prior-year period.
Net sales came in at $998 million compared with $1 billion in the prior-year quarter. The figure also missed the consensus estimate by 0.5%. The decline in Commercial & Industrial (“C&I”) product sales offset an increase in Residential product sales.
In the quarter under review, core sales growth (excluding the impact of acquisitions and foreign currency) was flat year over year.
Generac also highlighted that the company has agreed to increase its minority interest with an additional $35 million investment and further develop its commercial relationship with Wallbox. Wallbox is a prominent smart electric vehicle charging and energy management company. In December 2023, Generac made a minority investment in the company.
Generac updated its sales expectations for 2024 owing to recent power outage activity, including the impact of Hurricane Beryl.
For 2024, it now expects revenues to increase 4-8% compared with the earlier guidance of 3-7%.
Net income margin (before deducting for non-controlling interests) is now anticipated between 6.5% and 7.5% compared with the earlier guided range of 6-7%.
Adjusted EBITDA margin is estimated to be 17-18% compared with the previous guidance of 16.5-17.5%.
Quarter in Details
Segment-wise, Domestic revenues increased 1% year over year to $827.1 million. Results were aided by increased shipments of home standby and portable generators and higher C&I product sales to industrial distributors. This was mostly offset by reduced C&I shipments to telecom and national rental equipment clients.
International revenues fell 18% year over year to $184.5 million. However, favorable foreign currency movement provided a slight positive impact. Core revenues declined due to weak inter-segment sales (owing to softness in the telecom market) and reduced portable generator shipments in Europe.
Product-wise, revenues from Residential inched up 8% year over year to $538 million. C&I revenues totaled $344 million, down 10% year over year. Revenues from the Other product class totaled $115.6 million, down 1.6% year over year.
The Zacks Consensus Estimate for Residential and C&I products’ second-quarter revenues was pegged at $542 million and $338 million, respectively.
Margins
Gross profit was $375.6 million, up from $328.4 million in the prior-year quarter, with respective margins of 37.6% and 32.8%. Gross profit margin performance gained from a favorable sales mix and lower input expenses.
Total operating expenses were $272.3 million, up 12.3% year over year, due to higher employee costs and marketing spending.
Operating income came in at $103.2 million, up 20% year over year. Adjusted EBITDA, before deducting for non-controlling interests, was $165 million compared with $137 million a year ago.
Cash Flow & Liquidity
In the second quarter, the company generated $78 million of net cash from operating activities. Free cash flow totaled $50 million.
As of Jun 30, 2024, Generac had $218.3 million of cash and cash equivalents, with nearly $1.445 billion of long-term borrowings and finance lease obligations.
In the reported quarter, the company repurchased shares worth $51 million. GNRC had shares worth $449 left under its buyback authorization as of Jun 30, 2024.
In February 2024, management approved a new share buyback authorization that allows for a repurchase of up to $500 million in the next 24 months. It replaced the remaining balance on the earlier program.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Generac Holdings has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Generac Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.