Generac’s stock drops as residential-generator sales miss, outlook disappoints

Revenue for the latest quarter edged up 1.4% to $1.06 billion, below the FactSet consensus of $1.09 billion.

Residential-product sales ticked up 1% to $580.4 million, which was well short of the FactSet consensus of $605.7 million. Commercial and industrial sales inched up 0.4% to $362.9 million — but missed expectations of $369.4 million.

Despite the miss, the company said shipments of home standby generators returned to growth, and activations reached a quarterly record, even though there were fewer power outages. And the flat C&I performance was a result of weakness in the telecommunications and rental markets.

Net income grew to $97 million, or $1.57 a share, from $71 million, or 83 cents a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share increased to $2.07 from $1.78 but missed the FactSet consensus of $2.09.

Meanwhile, gross profit margin improved to 36.5% from 32.7%, due to lower raw material and transportation costs, favorable product mix and production efficiencies.

For 2024, the company expects net sales to rise between 3% and 7% from 2023, while the current FactSet sales consensus of $4.36 billion implies 8.5% growth.

While residential product sales are expected to grow in the “mid-teens” percentage range, which is better than the implied 13.2% growth implied by the FactSet consensus, C&I sales are expected to fall about 10%, compared with expectations for a 2.5% increase, due primarily to weakness with certain telecom, rental and “beyond standby” customers.

Generac’s stock has rallied 12.9% over the past three months through Tuesday, while the Industrial Select Sector SPDR ETF
XLI
has advanced 10.7% and the S&P 500 index
SPX
has tacked on 10.2%.