The latest results from Generac Holdings (GNRC 14.34%) -- released this morning -- seem to show that the worst is over for the maker of power generators, and investors are breathing a sigh of relief.
Results rebound after a bumpy summer
Generac makes power generators for homes and businesses. Given the number of headlines in recent years about massive storms and overwhelming demand stressing the power grid, it should be a great time for a business like Generac, but the company has struggled in recent months.
In August, shares of Generac plunged after the company reported lower revenue and the company cut guidance. The company said at the time that it was dealing with inventory issues and soft demand from consumers, and warned that given the uncertain nature of the economy, it was hard to say how the rest of the year would work out.
Investors got part of that answer on Wednesday when Generac released third-quarter results. The company earned $1.64 per share in the quarter on revenue of $1.07 billion, besting Wall Street expectations for $1.51 per share in earnings on sales of $1.04 billion.
Residential product sales were down 15% year on year, but a 24% uptick in commercial sales helped to offset some of that decline. Generac also saw gross margin rebound to 35.1%, from 33.2% a year ago, on lower raw material costs and streamlined logistics.
Notably, Generac backed its previous guidance for full-year revenue to decline by 10% to 12%. The company also said it expects robust free cash flow in the months to come.
Even with today's gains, Generac shares are still 38% below where they were prior to the August announcement of quarterly results. Indeed, the consumer business is still under pressure. But investors should take solace in hearing that the declines came in as expected.
Investors should be warned that there could be more volatility ahead, but Generac is a leading name in an important category. The concerns about extreme weather and the fragility of the power grid are not going away.
For those with a long-term mindset and the ability to handle near-term headwinds, Generac remains an intriguing pick to capitalize on some of those major energy trends.
Results rebound after a bumpy summer
Generac makes power generators for homes and businesses. Given the number of headlines in recent years about massive storms and overwhelming demand stressing the power grid, it should be a great time for a business like Generac, but the company has struggled in recent months.
In August, shares of Generac plunged after the company reported lower revenue and the company cut guidance. The company said at the time that it was dealing with inventory issues and soft demand from consumers, and warned that given the uncertain nature of the economy, it was hard to say how the rest of the year would work out.
Investors got part of that answer on Wednesday when Generac released third-quarter results. The company earned $1.64 per share in the quarter on revenue of $1.07 billion, besting Wall Street expectations for $1.51 per share in earnings on sales of $1.04 billion.
Residential product sales were down 15% year on year, but a 24% uptick in commercial sales helped to offset some of that decline. Generac also saw gross margin rebound to 35.1%, from 33.2% a year ago, on lower raw material costs and streamlined logistics.
Notably, Generac backed its previous guidance for full-year revenue to decline by 10% to 12%. The company also said it expects robust free cash flow in the months to come.
Even with today's gains, Generac shares are still 38% below where they were prior to the August announcement of quarterly results. Indeed, the consumer business is still under pressure. But investors should take solace in hearing that the declines came in as expected.
Investors should be warned that there could be more volatility ahead, but Generac is a leading name in an important category. The concerns about extreme weather and the fragility of the power grid are not going away.
For those with a long-term mindset and the ability to handle near-term headwinds, Generac remains an intriguing pick to capitalize on some of those major energy trends.
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