A month has gone by since the last earnings report for Generac Holdings (GNRC Quick QuoteGNRC - Free Report) . Shares have added about 3.2% 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 Q1 Earnings Beat Estimates, Revenues Up Y/Y

Generac reported first-quarter 2022 adjusted earnings of $2.09 per share, which beat the Zacks Consensus Estimate by 10%. However, the bottom line declined 12.2% year over year.

Net sales increased 41% year over year and came in at $1.14 billion and beat the consensus mark by 4.9%. Robust demand for Residential and Commercial & Industrial (C&I) products and effective M&A strategies boosted Generac’s first-quarter performance.

In the quarter under review, Core sales growth (excludes the impact of acquisitions and foreign currency) increased 33% year over year.

Quarter in Details

Segment-wise, Domestic revenues increased 39% year over year to $964.7 million, driven by the impact of acquisitions that contributed nearly 5% to revenues. Higher demand for home standby generators and PWRcell energy storage systems and strength across C&I products were the driving factors.

International revenues rose 49% to $171.2 million, driven by strong performance across all regions. The impact of acquisitions and forex contributed nearly 22% to revenues.

Product-wise, revenues from Residential soared 43% to $777 million. Revenues from C&I were $279 million, up 38% from the year-ago quarter’s levels. Revenues from the Other product class came in at $80.2 million, up 27.5% year over year.

Margins

Gross profit was $361 million, up from $321.8 million with respective margins of 31.8% and 39.9%. The gross profit margin declined due to higher input costs related to supply chain disruptions.

Operating expenses were $206 million, up 55.3% 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 $154.7 million, down 18.2%. Adjusted EBITDA was $196 million compared with $214 million in the year-ago quarter, driven by significant revenue growth.

Cash Flow & Liquidity

In the first quarter, the company used $10.1 million of net cash from operating activities. Free cash out flow came in at $36.8 million.

As of Mar 31, 2022, the company had $206 million in cash and cash equivalents with $1.003 billion of long-term borrowings and finance lease obligations.

2022 Outlook Raised

For 2022, Generac expects revenue growth between 36% and 40% against the earlier guidance of 32% and 36% year over year. This includes a net impact of between 5% and 7% from acquisitions and foreign currency changes.

The 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 21.5-22.5% against the earlier guidance of 22-23%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Generac Holdings has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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.