Yahoo Finance Generac Holdings (GNRC) Down 11.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Generac Holdings (GNRC). Shares have lost about 11.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Generac Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Generac Q4 Earnings Beat Estimates
Generac reported fourth-quarter 2022 adjusted earnings of $1.78 per share, which beat the Zacks Consensus Estimate by 4.7%. However, the bottom line decreased 29.1% year over year.
Net sales decreased 2% year over year and came in at $1.05 billion, and missed the consensus mark by 1.8%. The downtick was caused by softness in residential products and continued elevated home standby field inventory levels, which unfavorably impacted orders and shipments. However, it was partly offset by robust demand for Commercial & Industrial (C&I) products.
In the quarter under review, Core sales growth (excludes the impact of acquisitions and foreign currency) decreased 7% year over year.
Quarter in Details
Segment-wise, Domestic revenues decreased 3% year over year to $880.6 billion due to lower home standby and clean energy product sales, partly offset by strength across C&I products.
International revenues rose 22% to $219.2 million, driven by strong performance across all regions, especially in Europe and Latin America. The impact of acquisitions and forex contributed nearly 6.5% net headwind to revenues.
Product-wise, revenues from Residential declined 19% to $575 million. Revenues from C&I were $361 million, up 27% from the year-ago quarter’s levels. Revenues from the Other product class came in at $113 million, up 46.2% year over year.
Margins
Gross profit was $343.1 million, up from $362.5 million, with respective margins of 32.7% and 34%. The gross profit margin declined due to an unfavorable sales mix partly offset by pricing actions.
Total operating expenses were $235.9 million, up 26.1% from the prior-year quarter’s levels. The uptick was caused due to recurring operating expenses from previous acquisitions, legal and regulatory reserves, higher intangible amortization expenses and increased employee and marketing costs.
Operating income came in at $107.3 million, down 38.9%. Adjusted EBITDA was $174 million compared with $220 million in the year-ago quarter.
Cash Flow & Liquidity
In the fourth quarter, the company generated $101 million of net cash from operating activities. Free cash came in at $80 million.
As of Dec 31, 2022, the company had $132.7 million in cash and cash equivalents with $1.369 billion of long-term borrowings and finance lease obligations.
In the quarter under review, the company repurchased shares worth $222 million under existing share buyback authorization. As of Dec 31, 2022, the company has approximately $278 million remaining in the share repurchase program.
2023 Outlook
For 2023, Generac expects revenue to decline between 6% and 10% owing to lower shipments of residential products due to higher field inventory levels for home standby generators. This includes a net impact of 1% from acquisitions and foreign currency changes.
The net income margin (before deducting for non-controlling interests) is expected to be 7.5-8.5%. The adjusted EBITDA margin is estimated in the range of 17-18%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -57.77% due to these changes.
VGM Scores
Currently, Generac Holdings has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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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Generac Holdings Inc. (GNRC) : Free Stock Analysis Report
