Wall Street has changed its mind about the backup generator maker
Generac,
at least for now.
Shares were falling Wednesday as investors weighed the outlook for growth after the company reported its fourth-quarter earnings. They made a surprise turn, however, during the company’s earnings conference call.
Generac
announced quarterly earnings per share of $2.07 from $1.1 billion in sales. Wall Street was looking for a profit of $2.09 a share on sales of $1.1 billion, according to FactSet. A year ago, Generac reported earnings of $1.78 a share from $1 billion in sales.
For the full year, sales came in at about $4 billion, down from $4.5 billion generated a year earlier.
“Our fourth-quarter results demonstrate continued improvement in operating performance resulting in strong margin expansion and cash flow generation as we exited the year,” said CEO Aaron Jagdfeld in a news release. “Despite fewer power outages in the fourth quarter, home standby generator shipments returned to year-over-year growth.”
Residential sales were $580 million, up from $575 million in the fourth quarter of 2022. For all of 2023, residential sales came in at $2.1 billion, down from $2.9 billion in 2022.
Full-year sales to commercial customers were $1.5 billion, up from $1.3 billion generated in 2022.
The results were close to what analysts were modeling. The outlook for 2024, however, came in light.
Looking ahead, Generac expects sales to grow in 2024 driven by higher residential sales. Commercial sales, however, are expected to decline some 10% year over year due to weakness in the telecom and rental markets. Overall, sales should come in around $4.2 billion, about $200 million lower than current Wall Street projections.
Earnings before interest, taxes, depreciation, and amortization, or Ebitda, is expected to be about $710 million. Wall Street currently projects $800 million.
Shares fell more than 7% in premarket trading, opened lower, and then jumped about $10 a share, or almost 10%, at about 10:15 a.m. Eastern time. That left them up about 0.7% for the day at about 10:30 a.m. while the
S&P 500
and
Nasdaq Composite
were up about 0.9% and 1%, respectively
Coming into Wednesday trading, Generac stock had fallen about 1% over the past 12 months.
A conference call to discuss the results seems to have done the trick. “Home [generator] consultations in January of this year were at an all-time record for the month,” said Jagdfeld. “Activations—which are a proxy for installations—were at an all-time quarterly record in the fourth quarter.”
Installations reflect retail demand for generators. Generac, which sells to dealers, has been working through high inventories in its distribution channels for several quarters.
Management also offered some updated statistics for investors. Only 6.3% of single-family, detached, homes worth more than $150,000 have a backup generator, according to the company. Every 1% of market penetration is worth about $3 billion in sales, according to Generac.
Corrections & Amplifications: Generac had residential sales of $575 million in the fourth quarter of 2022. An earlier version of this article incorrectly said the figure was for the fourth quarter of 2023.
Write to Al Root at [email protected]
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