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Generac (GNRC) Reportedly Focusing on M&A to Drive Growth

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Generac Holdings Inc (GNRC - Free Report) is eyeing strategic acquisitions to boost its solutions’ portfolio and drive growth amid increasing demand, per a report from Bloomberg.

GNRC’s Chief Executive Officer (CEO), Aaron Jagdfeld, in an interview at Bloomberg News headquarters in New York, was quoted saying that utility bills were set to become one of the biggest household expenses in addition to rent/mortgage payments, thereby necessitating effective management of power usage.

Further, the report added that the CEO expects power prices to double over the next twenty years as utilities try to bolster grids amid increasing demand from artificial intelligence proliferation, data centers, electric vehicles and industrial facilities. Though Jagfield did not divulge much details, he underscored that Generac was eager to follow strategic deals to help expand the company’s energy technology portfolio, added Bloomberg.

The company has been focusing on inorganic strategy to drive top-line performance. In February 2023, GNRC acquired Germany-based REFUstor, which specializes in development and supply of battery storage hardware products, advanced platform and software services for the commercial/industrial energy storage vertical.

Some of the company’s other recent acquisitions include Blue Pillar (2022), ecobee Inc (2021), Off Grid Energy Ltd (2021), Tank Utility (2021) and Enbala (2020).

Ecobee provides sustainable smart-home solutions while Blue Pillar specializes in providing Industrial IoT network software solutions in a simple format to aid in efficient and seamless monitoring, and control of distributed energy generation.

Generac is a leading manufacturer of backup and prime power generation systems for residential and C&I applications, solar + battery storage solutions, advanced power grid software platforms and services, energy management devices and controls along with engine and battery-powered tools and equipment.

For 2023, GNRC reported a 12% decline in revenues to $4.02 billion. However, the company expects sales to register growth in 2024. It expects revenues to increase in the range of 3-7%.

Revenues will be driven by momentum in residential product sales growth, which is forecast in the mid-teens range. Residential product sales growth will gain from shipments of home standby generators and residential energy technology products.

However, C&I product sales are expected to decline 10% in 2024 owing to weakness with certain direct rental, telecom and “beyond standby” customers. Tough competition and high debt levels amid uncertain macro environment remain headwinds.

At present, GNRC carries a Zacks Rank #3 (Hold). The stock has gained 23.4% in the past year compared with the industry’s decline of 34.3%.

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Stocks to Consider

Some better-ranked stocks worth consideration in the broader technology space are Synopsys (SNPS - Free Report) , Iridium Communications (IRDM - Free Report) and Cadence Design Systems (CDNS - Free Report) . While SNPS and IRDM sport a Zacks Rank #1 (Strong Buy) each, CDNS carries a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for SNPS’ fiscal 2024 earnings per share (EPS) is pegged at $13.28. The long-term earnings growth rate is 17.5%. Synopsys’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 4.1%. Shares of SNPS have soared 42.9% in the past year.

The Zacks Consensus Estimate for IRDM’s 2024 EPS has increased 213% in the past 60 days to 72 cents. Iridium’s earnings beat the Zacks Consensus Estimate in two of the last four quarters and missed twice. The average earnings surprise is 91.7%.

The Zacks Consensus Estimate for CDNS’ 2024 EPS has increased 2.2% in the past 60 days to $5.94. Cadence’s beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 3.4%. Shares of CDNS have gained 41.5% in the past year.

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