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Generac (GNRC) Q1 Earnings Top Estimates on Record Revenues

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Generac Holdings Inc. (GNRC - Free Report) reported solid first-quarter 2021 results, wherein the bottom and the top lines beat the respective Zacks Consensus Estimate. Record revenues, solid demand environment and elevated shipments on the back of a robust liquidity position are likely to boost its growth momentum in 2021.

Net Income

On a GAAP basis, net income in the March quarter was $149 million or $2.33 per share compared with $44.5 million or 68 cents per share in the prior-year quarter. The year-over-year improvement was primarily attributable to higher revenues.

Quarterly adjusted net income was a record $152.7 million or $2.38 per share compared with $55.1 million or 87 cents per share in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 48 cents.

Generac Holdings Inc. Price, Consensus and EPS Surprise

Generac Holdings Inc. Price, Consensus and EPS Surprise

Revenues

With strong operational execution and broad-based strength across the business, quarterly revenues came in at an all-time high of $807.4 million compared with $475.9 million in the year-ago quarter. The whopping 69.7% surge was primarily driven by solid demand for both Residential and Commercial & Industrial (C&I) products.

Generac continues to witness unprecedented demand for its home standby generators due to higher power outages. Elevated shipments of PWRcell energy storage systems and C&I products also played a vital role in boosting Generac’s revenues. Further, the top line beat the consensus estimate of $733 million.

Segment-wise, Domestic revenues soared 84.2% year over year to $692.7 million, driven by the impact of acquisitions that accounted for nearly 2% of the revenue growth. Significant increase in shipments of home standby and portable generators, recovering C&I markets coupled with Generac’s expanded footprint in the clean energy market acted as key drivers for core sales growth. International revenues rose 14.8% to $114.7 million, driven by a rebound in market activity primarily in the European region, which was hurt by the COVID-19 pandemic.

Product-wise, revenues from Residential products rallied 110.4% to $542.1 million. Revenues from C&I products were $202.4 million, up from $172.1 million in the year-ago quarter. Revenues from other product classes came in at $62.9 million, up 36%.

Other Quarterly Details

Costs of goods sold increased 60% year over year to $485.6 million. Gross profit was $321.8 million, up from $172.3 million with respective margins of 39.9% and 36.2%. The increase was driven by a favorable sales mix from higher shipments of residential products and improved pricing with 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 $132.7 million compared with $109.5 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 $189.1 million, up 200.9%. Adjusted EBITDA was $214.2 million compared with $86 million in the year-ago quarter, driven by significant revenue growth.

Cash Flow & Liquidity

In the first three months of 2021, Generac generated $152.5 million of net cash from operating activities compared with $11.3 million in the prior-year period. With a robust liquidity position, free cash flow for the same period came in at $125.8 million against negative free cash flow of $0.9 million a year ago. Higher net income with a lower level of working capital investment in the current year quarter acted as a tailwind as well.

As of Mar 31, 2021, the company had $744.8 million in cash and cash equivalents with $841.5 million of long-term borrowings.

2021 Outlook Raised

For 2021, Generac expects revenue growth between 40% and 45% year over year, an increase from the prior guidance of 25-30%. Net income margin (before deducting for non-controlling interests) is expected to be 16-17% versus previous outlook of 15-16%, while adjusted EBITDA margin is estimated to be 24.5-25.5%, a revision from previously anticipated 24-25%.

Zacks Rank & Other Stocks to Consider

Generac currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader industry are Vicor Corporation (VICR - Free Report) , CalAmp Corp. (CAMP - Free Report) and Brooks Automation, Inc. (BRKS - Free Report) . While Vicor sports a Zacks Rank #1 (Strong Buy), CalAmp and Brooks Automation carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vicor delivered a trailing four-quarter positive earnings surprise of 80.6%, on average.

CalAmp delivered a trailing four-quarter positive earnings surprise of 107.5%, on average.

Brooks Automation delivered a trailing four-quarter positive earnings surprise of 45.2%, on average.

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