Generac Reports Strong Sales Growth During Hurricane Season

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Generac Reports Strong Sales Growth During Hurricane Season

Generac Holdings Inc. (NYSE: GNRC) reported that net sales in the third quarter of 2024 reached $1.17 billion, reflecting a 10% increase compared to the previous year. This growth largely stemmed from increased electrical outage activities following the Helen and Milton Hurricanes, leading to a 28% rise in residential product sales.

Despite a 15% decline in global commercial and industrial product sales and a 20% drop in international sales, the company raised its 2024 outlook, anticipating significant growth in residential sales and improvements in gross and adjusted EBITDA margins. Generac also announced it received a $50 million grant from the Department of Energy to implement microgrid solutions in California, which is expected to support the grid during peak demand periods.

Key Points

  • Generac's Q3 net sales increased by 10% year-over-year, reaching $1.17 billion.
  • Residential product sales grew by 28% due to the recent hurricanes.
  • The company raised its 2024 outlook, expecting an additional $200 million in shipments.
  • Adjusted EBITDA margins improved, with third-quarter margins at 19.8%.
  • Generac received a $50 million grant for California microgrid projects.
  • The company faces declines in international sales and C&I product shipments.
  • Q3 GAAP net income was $114 million, with diluted earnings per share of $1.89.

Company Outlook

  • A 5% to 9% net sales growth is expected for 2024.
  • High double-digit growth is projected in residential product sales.
  • Approximately 450 basis points improvement in gross margins compared to 2023.
  • Adjusted EBITDA margins are expected to range between 17.5% and 18.5% for the full year.
  • An expected free cash flow of around $500 million for 2024.

Negative Aspects

  • Global commercial and industrial product sales decreased by 15%.
  • International sales fell by 20% due to weak telecom market conditions and currency effects.
  • Sales forecasts for C&I and other products for 2024 were revised down by an additional $50 million compared to previous forecasts.

Positive Aspects

  • Positive growth trends in Latin America and the Middle East.
  • Planned new product launches and partnerships for the upcoming year.
  • Expansion of financing options for home standby generators to improve closure rates in 2025.

Shortcomings

  • Rental market performance is weaker than expected, with demand stagnating until 2025.
  • The commercial launch of the PWRcell 2 energy storage system has been postponed to February 2024.

Q&A Highlights

  • The impact of recent hurricanes on home standby generator sales was discussed.
  • An increase in demand of approximately $200 million is anticipated following hurricane events.
  • Expansion of the residential dealer network, especially in Texas.
  • Production increases are being affected by supply chain capacities.
  • A record month is expected for in-home consultations in October.

Generac Holdings Inc. maintains confidence in its strategic positioning and ability to meet increasing demand for backup power solutions. As the commercial launch of the PWRcell 2 energy storage system approaches and with ongoing investments in energy technology, the company prepares to sustain its growth trajectory despite current market challenges. Management is focused on navigating these conditions and preparing for future opportunities. Discussion of the 2024 fourth-quarter and full-year results is expected during the next earnings call in mid-February.

InvestingPro Forecasts Generac Holdings Inc.’s (NYSE: GNRC) recent financial performance and outlook align with several key forecasts from InvestingPro. The reported 10% net sales increase for Q3 2024 and the raised outlook for the year are consistent with InvestingPro’s insight that “net income is expected to increase this year.” This growth trajectory is supported by the company's strong position in the residential products segment, which saw a 28% increase due to recent hurricane activities.

InvestingPro data indicates that as of Q2 2024, Generac's trailing twelve-month revenue was $4,021.81 million, with a gross profit margin of 36.21%. These figures provide context regarding the company's financial health and its ability to capitalize on market opportunities such as the rising demand for home standby generators following natural disasters.

Another relevant InvestingPro insight notes that Generac is “trading at a low P/E ratio with respect to short-term earnings growth.” This is particularly interesting in light of the company's raised outlook for 2024 and the anticipated additional $200 million in shipments. The P/E ratio of 0.67 as of Q2 2024 supports this view and suggests that the stock may be undervalued in light of growth expectations.

Generac's strong market position is further evidenced by an impressive 1-year total price return of 96.92% reported by InvestingPro. This performance is consistent with positive points such as the company’s favorable growth trends in Latin America and the Middle East, as well as planned new product launches and partnerships.

It is important to note that InvestingPro has provided 11 additional insights for Generac. These insights offer investors a more comprehensive analysis of the company's financial health and market position. These forecasts may be particularly valuable for those looking to make informed decisions in light of Generac's recent performance and future projections.