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Is a Beat in Store for Generac (GNRC) This Earnings Season?

Generac Holdings Inc. GNRC is scheduled to report third-quarter 2021 results on Nov 2, before the opening bell. In the last reported quarter, the company delivered an earnings surprise of 1.7%. It pulled off a trailing four-quarter earnings surprise of 13.5%, on average.

The Waukesha, WI-based company is expected to have recorded higher revenues on a year-over-year basis. A solid demand environment and robust operational execution across its businesses played a vital role. Elevated shipments of Commercial & Industrial products across several markets and regions post the pandemic lows in the prior year are likely to have driven Generac’s momentum. Further, its augmented footprint in the clean energy market, successful capacity-expansion efforts, and accretive strategic acquisitions might have acted as major tailwinds as well.

Key Factors

During the quarter under review, Generac forayed into the microinverter market with the acquisition of Chilicon Power, LLC for an undisclosed amount. The transaction is likely to expand its suite of clean energy products and augment its leading position in the market. The acquisition boosts Generac’s solar and storage product offerings as significant changes in the energy landscape, drastic climate change, aging power infrastructure, and deployment of superfast 5G technology spur secular growth opportunities.

To create a new customer contact center, Generac invested more than $8 million to expand its corporate operations into the Village of Pewaukee with the purchase of a new facility that will accommodate key sales groups and portions of its marketing team. This lucrative investment will enable Generac to tap on the growing market demand and support its rapidly evolving business while effectively catering to its partners and customers. Moreover, it fortified its position in the energy market by offering home standby generators with Smart Grid Ready technology. The move allows its customers to sell power back to the grid and offset their energy expenses. The Smart Grid Ready capabilities are being offered through Generac’s Enbala Concerto platform.

In the third quarter, Generac acquired Apricity Code Corporation for an undisclosed amount. The acquisition will push Generac’s efforts to provide a broader energy technology portfolio. Also, it will increase the company’s speed to market for both its Clean Energy and Grid Services products and solutions. It acquired a leading designer and manufacturer of energy storage products and solutions, Off Grid Energy Ltd, for an undisclosed sum. The energy storage solutions manufactured by Off Grid Energy will help in expanding Generac’s sustainable power offerings and allow it to meet the needs of its customers. The technical expertise of the Off Grid Energy team will aid Generac in bolstering its product roadmap.

Marking a significant step toward its evolution into an energy technology company, Generac created a new group — Generac Grid Services. It was formed primarily through the acquisition of Enbala Power Networks in October 2020. The entity will provide solutions directly to utilities, grid operators, and energy markets. It will leverage products from across the enterprise that includes home standby generators, PWRcell storage systems, and industrial natural gas generators.

Generac’s subsidiary, Generac Power Systems, signed a five-year development agreement with Enchanted Rock, LLC to supply its natural gas generators and control systems. Generac also inked an agreement to acquire Tank Utility Inc. for an undisclosed amount to augment its propane-powered portfolio. The deal will enable Generac 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. Such opportune acquisitions are likely to help Generac reinforce its competitive position in the market.

Further, it unveiled new products, Generac PWRmicros and solar microinverter solutions, to compete on performance and reliability. It launched PWRgenerator to quickly recharge Generac's PWRcell Battery. PWRmanager, an innovative load management system for Generac's PWRcell Energy Storage System, was part of the product introduction list as well. These developments, supported by a resilient business model and a healthy liquidity position, are likely to have bolstered its core sales growth in the to-be-reported quarter.

For the September quarter, the Zacks Consensus Estimate for total revenues is pegged at $960 million, which indicates a surge of 36.9% from the year-ago quarter’s reported figure. The consensus estimate for adjusted earnings per share is pegged at $2.39, which suggests an increase of 14.9%.

What Our Model Says

Our proven model predicts an earnings beat for Generac this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is perfectly the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Generac’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +6.08% as the former is pegged at $2.54 and the latter at $2.39.

Generac Holdings Inc. Price and EPS Surprise

Zacks Rank: Generac currently has a Zacks Rank #3.

Other Stocks to Consider

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Exelixis, Inc. EXEL is slated to release third-quarter 2021 results on Nov 2. It has an Earnings ESP of +20.00% and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Denny's Corporation DENN is scheduled to release third-quarter 2021 results on Nov 2. The company has an Earnings ESP of +15.15% and sports a Zacks Rank #1, at present.

Halozyme Therapeutics, Inc. HALO has an Earnings ESP of +11.91% and a Zacks Rank of 2. The company is set to report third-quarter 2021 results on Nov 2.

Tech IPOs With Massive Profit Potential: Last years top IPOs surged as much as 299% within the first two months. With record amounts of cash flooding into IPOs and a record-setting stock market, this year could be even more lucrative. 

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