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Generac (GNRC) Buys Tank Utility to Boost Propane-Powered Range

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Generac Holdings Inc. GNRC recently inked an agreement to acquire Tank Utility Inc. for an undisclosed amount to augment its propane-powered portfolio. The transaction is likely to be completed by the next month and enable the company to cater to a surge in demand for generators for an uninterrupted power supply in storms or other power outages with an increasing work-from-home trend.

Boston-based Tank Utility uses real-time tank level measurements from IoT monitors and innovative business intelligence software to optimize propane fuel logistics and helps fuel operators to provide a better customer experience through greater transparency. Its solutions improve fuel efficiency and reduce emission levels with sophisticated remote monitoring capabilities for propane tanks, leveraging easy-to-use 4G LTE devices and industry-leading software and analytics.

Generac has long been associated with Tank Utility as a minority investor. The acquisition will enable generator and fuel dealers to better address the coronavirus-induced demand surge for various power products in residential locations as a back-up facility to support off-grid power needs and to protect from grid instability. The buyout will empower Generac to offer an integrated portfolio of propane-powered backup generators, battery storage, and home energy management solutions along with Tank Utility's monitoring and analytics services. This, in turn, will expand Generac's connectivity functionality and services with remote monitoring capabilities and enable homeowners to better adapt to the evolving energy ecosystem.

With more than six decades of industry experience and technology knowhow, Generac is one of the leading manufacturers of home backup generators, offering the widest range of power products in the marketplace for diversified end users. Moreover, the company intends to leverage its experience and core competencies to strengthen its position in the emerging residential energy storage and monitoring markets. While its Mobile Link remote monitoring capability offers a Wi-Fi-enabled feature to conveniently check the status of a generator online and receive maintenance and service alerts, the “Fleet” feature enables its distribution partners to monitor the installed base of customers for a more proactive service experience.

Significant changes in the energy landscape, drastic climate change, an abundance of natural gas, aging power infrastructure, and deployment of super-fast 5G technology are likely to spur secular growth opportunities for Generac. An aging population and increased cases of power outages due to inclement weather conditions and catastrophic events like wildfires have amplified the importance of backup power for critical infrastructure facilities. The company aims to capitalize on these key growth drivers by generating more sales through higher market penetration and continued focus on research and development in order to foster innovation. A diversified distribution channel further ensures that the products reach a broad global customer base. The company has the largest network of factory direct independent generator dealers in the industry in North America.

Generac intends to diversify its business model from being solely ‘‘equipment centric’’ to a systems and services provider through connectivity solutions and subscription-based applications, with emphasis on improving the end-user experience and helping customers lower utility costs. This, in turn, is likely to help unlock new business opportunities and generate steady revenues from subscriptions and spare parts. The company leverages data obtained from connected devices by developing predictive analytics that helps in continuously improving product quality, sales processes and tools, energy optimization, aftermarket penetration, customer experience, and alignment with dealers. In addition, the company pursues potential acquisition opportunities to monetize an ecosystem of devices that relate to energy use, storage, generation, control, and optimization to further strengthen its leading market position. This holistic growth strategy, as exemplified by the recent Tank Utility acquisition, offers a competitive advantage to Generac against other firms.

The stock has gained 130.3% in the past year compared with the industry’s rally of 76.8%.

Zacks Investment Research
Zacks Investment Research


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We remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the broader industry are Clearfield, Inc. CLFD, InterDigital, Inc. IDCC, and Juniper Networks, Inc. JNPR, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered a trailing four-quarter earnings surprise of 49%, on average.

InterDigital has a long-term earnings growth expectation of 15%. It delivered an earnings surprise of 536%, on average, in the trailing four quarters.

Juniper has a long-term earnings growth expectation of 8.4%. It delivered an earnings surprise of 7.5%, on average, in the trailing four quarters.


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