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Why Is Generac Holdings (GNRC) Up 4.2% 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 4.2% 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 Fall Y/Y
Generac reported first-quarter 2023 adjusted earnings of 63 cents per share, which beat the Zacks Consensus Estimate of 52 cents. GNRC reported adjusted earnings of $1.98 in the prior-year quarter.
Net sales decreased 22% year over year to $888 million, but beat the consensus estimate of $840.1 million The year-over-year performance was affected by softness in residential products and continued excess backlog of home standby field inventory levels coupled with decline in clean energy products. However, it was partly offset by robust demand for Commercial & Industrial (C&I) products.
In the quarter under review, core sales growth (excluding the impact of acquisitions and foreign currency) decreased 24% year over year.
Quarter in Details
Segment-wise, Domestic revenues decreased 26% year over year to $720 million due to lower home standby and clean energy product shipments, partly offset by strength across C&I products.
International revenues rose 17% to $216.5 million, driven by strong performance in Europe. The impact of acquisitions and forex contributed nearly 2% net headwind to revenues.
Product-wise, revenues from Residential declined 46% to $419 million. Revenues from C&I were $363 million, up 30% from the year-ago quarter’s levels. Revenues from the Other product class totaled $106.1 million, up 32.3% year over year.
Margins
Gross profit was $272.5 million, down from $360.7 million, with respective margins of 30.7% and 31.8%. Gross profit margin declined due to an unfavorable sales mix partly offset by pricing actions and lower input costs.
Total operating expenses were $228.1 million, up 10.7% from the prior-year quarter’s levels. The uptick was caused due to higher promotion and employee costs, marketing, legal and regulatory expenses along with recurring operating expenses pertaining to recent acquisitions
Operating income came in at $44.5 million, down 71.3%. Adjusted EBITDA was $100.1 million compared with $196.4 million in the year-ago quarter.
Cash Flow & Liquidity
In the first quarter, the company used $18.6 million of net cash from operating activities. Free cash outflow came in at $41.7 million.
As of Mar 31, GNRC had $137.4 million in cash and cash equivalents with $1.527 billion of long-term borrowings and finance lease obligations.
2023 Outlook
For 2023, Generac continues to expect revenues to decline in the range of 6-10%. Lower shipments of residential products due to higher field inventory levels for home standby generators are likely to cause the downturn. This includes a net favorable impact of 1-2% from acquisitions and foreign currency changes.
Net income margin (before deducting for non-controlling interests) is expected to be 7.5-8.5%. Adjusted EBITDA margin is estimated in the range of 17-18%.
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 poor Growth Score of F, however its Momentum Score is doing a lot better 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 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 4.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Generac Holdings (GNRC - Free Report) . Shares have added about 4.2% 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 Fall Y/Y
Generac reported first-quarter 2023 adjusted earnings of 63 cents per share, which beat the Zacks Consensus Estimate of 52 cents. GNRC reported adjusted earnings of $1.98 in the prior-year quarter.
Net sales decreased 22% year over year to $888 million, but beat the consensus estimate of $840.1 million The year-over-year performance was affected by softness in residential products and continued excess backlog of home standby field inventory levels coupled with decline in clean energy products. However, it was partly offset by robust demand for Commercial & Industrial (C&I) products.
In the quarter under review, core sales growth (excluding the impact of acquisitions and foreign currency) decreased 24% year over year.
Quarter in Details
Segment-wise, Domestic revenues decreased 26% year over year to $720 million due to lower home standby and clean energy product shipments, partly offset by strength across C&I products.
International revenues rose 17% to $216.5 million, driven by strong performance in Europe. The impact of acquisitions and forex contributed nearly 2% net headwind to revenues.
Product-wise, revenues from Residential declined 46% to $419 million. Revenues from C&I were $363 million, up 30% from the year-ago quarter’s levels. Revenues from the Other product class totaled $106.1 million, up 32.3% year over year.
Margins
Gross profit was $272.5 million, down from $360.7 million, with respective margins of 30.7% and 31.8%. Gross profit margin declined due to an unfavorable sales mix partly offset by pricing actions and lower input costs.
Total operating expenses were $228.1 million, up 10.7% from the prior-year quarter’s levels. The uptick was caused due to higher promotion and employee costs, marketing, legal and regulatory expenses along with recurring operating expenses pertaining to recent acquisitions
Operating income came in at $44.5 million, down 71.3%. Adjusted EBITDA was $100.1 million compared with $196.4 million in the year-ago quarter.
Cash Flow & Liquidity
In the first quarter, the company used $18.6 million of net cash from operating activities. Free cash outflow came in at $41.7 million.
As of Mar 31, GNRC had $137.4 million in cash and cash equivalents with $1.527 billion of long-term borrowings and finance lease obligations.
2023 Outlook
For 2023, Generac continues to expect revenues to decline in the range of 6-10%. Lower shipments of residential products due to higher field inventory levels for home standby generators are likely to cause the downturn. This includes a net favorable impact of 1-2% from acquisitions and foreign currency changes.
Net income margin (before deducting for non-controlling interests) is expected to be 7.5-8.5%. Adjusted EBITDA margin is estimated in the range of 17-18%.
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 poor Growth Score of F, however its Momentum Score is doing a lot better 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 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.