A month has gone by since the last earnings report for Generac Holdings (GNRC Quick QuoteGNRC - Free Report) . Shares have added about 2% 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 Q2 Earnings Beat Estimates on Solid Top-Line Growth

Generac solid second-quarter 2021 results, wherein both the bottom line and top line surpassed their respective Zacks Consensus Estimate. Record revenues, capacity-expansion efforts, effective supply chain mechanism, healthy traction in clean energy market and robust demand for Residential and C&I products across various end markets supported by a sound balance sheet are expected to spur its growth in 2021.

Net Income

On a GAAP basis, net income in the June quarter was $127 million or $2.01 per share compared with $66.1 million or $1.02 per share in the prior-year quarter. The year-over-year improvement was primarily attributable to top-line expansion.

Quarterly adjusted net income was a record $153.2 million or $2.39 per share compared with $88.5 million or $1.40 per share in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 4 cents.

Revenues

With robust operational execution and broad-based growth across the business, quarterly revenues came in at an all-time high of $920 million compared with $546.8 million in the year-ago quarter. The stellar 68.2% surge was primarily driven by solid demand for both Residential and C&I products.

Generac continues to witness elevated shipments of PWRcell energy storage systems as a result of its unprecedented demand. The company is committed in its efforts to augment the production capacity of home standby generators at a better-then-expected rate. With businesses rebounding post the COVID-19 lockdown followed by a continued pickup in activity from telecom national account customers, demand for C&I products has improved significantly.

Effective supply chain mechanism and overall stronger outlook for domestic and international markets fueled by the Deep Sea Electronics acquisition also played a crucial role in boosting Generac’s revenues. Further, the top line beat the consensus mark of $872 million.

Segment-wise, Domestic revenues surged 70.2% year over year to $784.1 million, driven by the impact of acquisitions that accounted for nearly 2% of the revenue growth. Higher shipments of home standby, portable generators and C&I mobile products, strength across residential and C&I markets coupled with Generac’s footprint in the rapidly expanding clean energy market acted as key drivers for core sales growth. International revenues rose 57.8% to $135.8 million, driven by a rebound in end-market activity, primarily in the European and Latin American regions post the COVID-19 lows last year. The impact of acquisitions and forex accounted for nearly 13% of revenue growth.

Product-wise, revenues from Residential soared 75.8% to $600 million. Revenues from C&I were $254.3 million, up from $154.9 million in the year-ago quarter. Revenues from Other product class came in at $65.7 million, up 29.8%.

Other Quarterly Details

Costs of goods sold rallied 71.7% year over year to $580.2 million. Gross profit was $339.7 million, up from $209 million with respective margins of 36.9% and 38.2%. The increase was driven by improved pricing with favorable overhead absorption from higher sales volumes. However, it was partially offset by higher input costs related to logistics, labor and raw materials.

Total operating expenses were $156.8 million compared with $119.4 million in the prior-year quarter. This was due to higher variable expenses from an increase in sales volumes, incentive compensation, higher employee costs and the impact of acquisitions. Operating income came in at $183 million, up 104.3%. Adjusted EBITDA was $217.7 million compared with $123.1 million in the year-ago quarter, driven by significant revenue growth.

Cash Flow & Liquidity

In the first six months of 2021, the company generated $275 million of net cash from operating activities compared with $113.1 million in the prior-year period. Backed by a healthy liquidity position, free cash flow for the same period came in at $222.1 million compared with $88.1 million a year ago. Higher net income in the quarter acted as a major tailwind.

As of Jun 30, 2021, the company had $390.1 million in cash and cash equivalents with $842.6 million of long-term borrowings and finance lease obligations.

2021 Outlook Updated

For 2021, Generac expects revenue growth between 47% and 50% year over year, an increase from the prior guidance of 40-45%. Net income margin (before deducting for non-controlling interests) is expected to be 15.5-16% versus previous outlook of 16-17%, while adjusted EBITDA margin is estimated to be 24.5-25% compared with the previously anticipated range of 24.5-25.5%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -6.29% due to these changes.

VGM Scores

Currently, Generac Holdings has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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.