Generac (GNRC) Q2 Earnings & Revenues Beat Estimates, Up Y/Y

Generac Holdings Inc. GNRC reported second-quarter 2022 adjusted earnings of $2.99 per share, which beat the Zacks Consensus Estimate by 12.8%. Also, the bottom line increased 25.1% year over year.

Net sales increased 40% year over year and came in at $1.29 billion beating the consensus mark by 2.4%. Robust demand for Residential and Commercial & Industrial (C&I) products boosted Generac’s second-quarter performance.

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

Following the announcement, shares of the company are up 0.9% in pre-market trading on Aug 3, 2022. In the past year, shares have lost 33.7% compared with the industry’s decline of 32%.

Generac Holdings Inc. Price, Consensus and EPS Surprise

Generac Holdings Inc. Price, Consensus and EPS Surprise

Generac Holdings Inc. price-consensus-eps-surprise-chart | Generac Holdings Inc. Quote

Quarter in Details

Segment-wise, Domestic revenues increased 42% year over year to $1.13 billion, driven by the impact of acquisitions that contributed nearly 6% to revenues. Higher demand for home standby generators and strength across C&I products were the driving factors.

International revenues rose 43% to $203.3 million, driven by strong performance across all regions especially in Europe and Latin America. The impact of acquisitions and forex contributed nearly 9% to revenues.

Product-wise, revenues from Residential soared 49% to $896 million. Revenues from C&I were $309 million, up 22% from the year-ago quarter’s levels. Revenues from the Other product class came in at $86 million, up 30.9% year over year.

Margins

Gross profit was $456.9 million, up from $339.7 million with respective margins of 35.4% and 36.9%. The gross profit margin declined due to higher input costs related to supply chain disruptions partly offset by pricing actions and favorable sales mix.

Operating expenses were $83.4 million, up 53.2% from the prior-year quarter’s levels. This was due to higher variable expenses from an increase in sales volumes, a rise in employee costs and the impact of acquisitions.

Operating income came in at $216.8 million, up 18.5%. Adjusted EBITDA was $271.5 million compared with $217.7 million in the year-ago quarter, driven by significant revenue growth.

Cash Flow & Liquidity

In the second quarter, the company generated $23.8 million of net cash from operating activities. Free cash flow came in at $5.8 million.

As of Jun 30, 2022, the company had $467.1 million in cash and cash equivalents with $1.287 billion of long-term borrowings and finance lease obligations.

In the quarter under review, the company repurchased shares worth $124 million, thereby exhausting its existing share buyback authorisation.

On Jul 29, 2022, the company announced a new stock repurchase program for $500 million, expanding over a 24-month period.

2022 Outlook

For 2022, Generac expects revenue growth between 36% and 40%, unchanged from the previous guidance. This includes a net impact 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%.

Zacks Rank & Stocks to Consider

Generac currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology space are Badger Meter BMI, InterDigital IDCC and Cadence Design Systems CDNS. Cadence Design Systems and  Badger Meter sport a Zacks Rank #1 (Strong Buy) whereas InterDigital carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CDNS 2022 earnings is pegged at $4.11 per share, rising 5.7% in the past 60 days. The long-term earnings growth rate is anticipated to be 17.7%.

Cadence’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 9.8%. Shares of CDNS have jumped 21.4% in the past year.

The Zacks Consensus Estimate for BMI’s 2022 earnings is pegged at $2.30 per share, up 7% in the past 60 days.

Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters, with the average being 12.6%. Shares of BMI have lost 4.6% of their value in the past year.

The Zacks Consensus Estimate for InterDigital’s 2022 earnings is pegged at $2.76 per share, declining 15.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 15%.

InterDigital’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 141.1%. Shares of IDCC have declined 11% in the past year.

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