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U.S. generator maker Generac falls after Truist cuts rating on macro concerns

By Scott Kanowsky -- Shares in Generac Holdings Inc. (NYSE:GNRC) fell on Tuesday after analysts at Truist Securities downgraded their rating of the U.S. backup generator manufacturer, citing the possible negative impact of elevated interest rates and product prices on its annual sales.

In a note to clients, the Truist analysts slashed their rating of the Wisconsin-based company to Hold from Buy and lowered its share price target to $145 from $160.

Generac executives have previously flagged internal challenges to both its home standby generator and clean energy businesses despite broader factors like at-home working and frequent outage events boosting customer demand for the company's products over the last three years.

The Truist analysts argued that while these wider trends are likely to provide some support in the long term, higher borrowing costs and above-average inflation will weigh on sales at these two key divisions over a shorter time frame.

As a result, Truist estimates that the group's full-year revenue will miss Wall Street forecasts by about 3%, while 2023 earnings before interest, tax, depreciation, and amortization margin will be around 9% below expectations.

"[W]e believe that near-term macro [and] market headwinds present heightened downside risk to a 2H:23 return-to-growth [and] could lengthen the recovery period," the analysts wrote.

Shares in Generac have fallen by more than 56% over the past one-year period.

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