Generac Holdings Inc. GNRC has released preliminary financial results for the third quarter ended Sep 30, 2022, and slashed its outlook for full-year 2022.
Pressured sales in the Residential Products business and a bankruptcy filing by a large customer hurt its clean energy product shipments in the third quarter. Though sales rose 15% to about $1.09 billion as compared to $943 million in the prior-year quarter, this fell short of the company’s expectations.
Following the announcement, shares plummeted 25.3% and closed at $110.30 on Oct 19, 2022.
Generac Holdings Inc. Price and Consensus
Generac Holdings Inc. price-consensus-chart | Generac Holdings Inc. Quote
Preliminary Third-Quarter Results
Residential product sales were under pressure during the quarter, despite Commercial & Industrial product shipments performing as anticipated. The installation capacity for residential standby generators continued to rise, as mentioned in the company’s second-quarter earnings call, but it still fell short of production output.
Although end customer demand is still high due to elevated power outages, most notably those caused by Hurricane Ian, but fell short of the company’s production output, which led to greater field inventory levels and lower home standby generator orders from the company’s channel partners than anticipated, per company report.
Shipments of clean energy products were also highly impacted during the quarter by a leading customer who has stopped its operations and filed for bankruptcy protection.
Preliminary adjusted net income was approximately $1.75 per share, down 25.5% during the third quarter as compared to $2.35 per share in the prior-year quarter.
Preliminary net income during the third quarter was 83 cents per share, down 57% compared to $1.93 per share in the prior-year quarter. Pre-tax charges of about $55 million are included in the net income for the current year, including about $37 million in warranty-related costs for clean energy products and about $18 million in bad debt costs associated with a clean energy product customer who has declared bankruptcy.
Preliminary adjusted EBITDA before deducting for non-controlling interests was about $184 million, or 17% of net sales, during the third quarter compared to $209 million, or 22% of net sales in the prior-year quarter.
The company plans to release its full third-quarter 2022 results before the market opens on Nov 2, 2022.
Owing to the above-mentioned factors, the company has slashed its sales growth guidance range to 22-24% from the earlier guidance range of 36-40%. The current year’s guidance includes 5% to 7% net impact from acquisitions and foreign currency.
Home standby order challenges are anticipated to last through the fourth quarter and the first half of 2023 as distribution partners continue to expand their installation capabilities and reduce their accumulated backlogs and excessive field inventories, noted Generac.
The company now expects the net income margin, before deducting for non-controlling interests for the full-year 2022 to be about 9% to 10% compared to the earlier guidance of 13% to 14%. The impact of the above-mentioned $55 million pre-tax costs in the third quarter is reflected in the net income projection.
Also, the company projects the adjusted EBITDA margin to be about 18% to 19% compared to the earlier guidance of 21.5% to 22.5%.
Zacks Rank & Stocks to Consider
At present, GNRC carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader technology space are InterDigital IDCC, Pure Storage PSTG and Aspen Technology AZPN. Pure Storage and InterDigital currently sport a Zacks Rank #1 (Strong Buy), whereas Aspen Technology presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
The Zacks Consensus Estimate for InterDigital’s 2022 earnings is pegged at $2.45 per share, up 2.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 25%.
InterDigital’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 81.9%. Shares of IDCC have decreased 30.4% in the past year.
The Zacks Consensus Estimate for PSTG 2022 earnings is pegged at $1.18 per share, rising 24.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 35.5%.
Pure Storage’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 171.8%. Shares of PSTG have increased 6.1% in the past year.
The Zacks Consensus Estimate for Aspen Technology’s fiscal 2023 earnings is pegged at $6.77 per share, increasing 0.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 18.2%.
Aspen Technology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 6.2%. Shares of AZPN have increased 53.7% in the past year.
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