Generac (GNRC) Q3 Earnings & Revenues Beat Estimates, Fall Y/Y
Generac Holdings Inc GNRC reported third-quarter 2023 adjusted earnings of $1.64 per share, which beat the Zacks Consensus Estimate of $1.50. GNRC reported adjusted earnings per share (EPS) of $1.75 in the prior year.
Net sales decreased 2% year over year to $1.07 billion but outshined the consensus estimate of $1038.1 million. The year-over-year performance was affected by softness in the Residential products business.
The company added that it witnessed a sequential increase in shipments of home standby generators. Higher activations are pushing field inventories toward more sustainable levels, noted GNRC. However, it was partly offset by robust demand for Commercial & Industrial (C&I) products.
Generac Holdings Inc. Price, Consensus and EPS Surprise
Generac Holdings Inc. price-consensus-eps-surprise-chart | Generac Holdings Inc. Quote
In the quarter under review, core sales growth (excluding the impact of acquisitions and foreign currency) reduced 4% year over year.
For 2023, GNRC continues expecting revenues to plunge in the range of 10-12%. This includes a net favorable impact of 2% from acquisitions and foreign currency changes.
Net income margin (before deducting for non-controlling interests) is now anticipated to be 5-6% compared with the earlier guided range of 6-7%. Adjusted EBITDA margin is estimated in the 15.5-16.5% band, unchanged from previous guidance.
Shares of GNRC are up 14.1% in the pre-market trading on Nov 1. The stock has lost 26.7% of its value compared with the sub-industry’s decline of 53.9%.
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Quarter in Details
Segment-wise, Domestic revenues declined 6% year over year to $894 million. Revenues were down due to lower residential product sales (mainly home standby and portable generator shipments) which was partly offset by growth in C&I product sales.
International revenues rose 14% to $207.6 million, with acquisitions and favorable foreign currency movement providing a positive impact of 11%. Core revenues were up 3%, driven by healthy sales of C&I products in most regions. Weak portable generator sales in Europe acted as a headwind.
Product-wise, revenues from Residential tumbled 15% to $565 million. C&I revenues were $385 million, up 24% from the year-ago levels. Revenues from the Other product class totaled $121 million, gaining 7.2% year over year.
The Zacks Consensus Estimate for Residential and C&I products’ third-quarter revenues was pegged at $574 million and $342 million, respectively.
Margins
Gross profit was $375.8 million, up from $361.1 million in the prior-year quarter, with respective margins of 35.1% and 33.2%. Gross profit margin performance gained from lower raw material and logistics costs, and production efficiencies.
Total operating expenses were $271 million, down 0.9% from the prior-year levels.
Operating income came in at $104.8 million, down 19.7% year over year. Adjusted EBITDA, before deducting for non-controlling interests, was $189 million compared with $184 million a year ago.
Cash Flow & Liquidity
In the third quarter, the company generated $140 million of net cash from operating activities. Free cash outflow totaled $117 million.
As of Sep 30, GNRC had $161.5 million of cash and cash equivalents, with $1.465 billion of long-term borrowings and finance lease obligations.
During the reported quarter, the company repurchased 875,580 shares worth $100 million. As of Sep 30, 2023, it has $178 million worth of stock remaining under the current repurchase program.
Zacks Rank
Generac currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Asure Software ASUR, Synopsys SNPS and VMware VMW. While Asure Software sports a Zacks Rank #1 (Strong Buy), Synopsys and VMware carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Asure Software’s 2023 EPS has increased 5.9% in the past 60 days to 54 cents.
Asure Software’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 676.4%. Shares of ASUR have climbed 28.2% in the past year.
The Zacks Consensus Estimate for Synopsys’ fiscal 2023 EPS has remained flat in the past 60 days at $11.09. SNPS’ long-term earnings growth rate is 16.7%. Shares of SNPS have surged 67% in the past year.
The Zacks Consensus Estimate for VMware’s fiscal 2024 EPS has improved 2.3% in the past 60 days to $7.23.
VMware’s earnings outpaced the Zacks Consensus Estimate in two of the last four quarters while missing twice. The average earnings surprise is 1.2%. Shares of VMW have jumped 30.1% in the past year.
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