The fourth-quarter 2023 results for Generac Holdings Inc (GNRC) have failed to meet the Zacks Consensus Estimate, but the company’s adjusted earnings per share (EPS) grew year over year to $2.07 from $1.78. Net sales increased incrementally, up 1% to $1.06 billion, though they fell short of the consensus estimate by 3.07%. This performance improvement is the result of growth across both segments.
Revenue Decline & Promising Outlook
For 2023, GNRC reported a 12% decline in revenues, generating $4.02 billion. Nevertheless, the company foresees a sales rebound for 2024. GNRC expects revenues to rise by 3-7%, driven in large part by a residential product sales growth predicted to be in the mid-teens range. Such growth will largely be fueled by shipments of home standby generators and residential energy technology products.
Conversely, C&I product sales are expected to shrink by 10% due to weaknesses in specific client bases. GNRC indicated that net income margin is anticipated in the 6.5-7.5% range, with adjusted EBITDA margin estimated in the 16.5-17.5% band.
Stock Performance & Finances
Post the report, GNRC’s share value saw a 6.1% decline in pre-market trading activities on February 14, totaling an 8.5% loss when compared to a sub-industry decline of 49.6%. At the close of 2023, GNRC held $201 million in cash and cash equivalents, with $1.448 billion in long-term borrowings and finance lease obligations. Furthermore, the company initiated a new stock buyback program authorizing the repurchase of up to $500 million over the next 24 months, replacing the existing program’s balance.
Quarterly Highlights
Segment-wise, domestic revenues showed a 1% year-over-year increase to $891 million. International revenues, on the other hand, decreased by 13% to $190.1 million, with core revenues dropping 20%. Product-wise, revenues from residential products inched up 1% to $580 million, while C&I revenues inched up to $363 million from $361 million in the prior-year quarter. Revenues from the other product class grew by 6.5% year over year.
Future Prospects and Investment
The company’s outlook for revenue growth, particularly attributed to residential products, seems promising. Despite the recent decline in stock value, GNRC’s initiatives for growth and potential investment opportunities indicate a hopeful future.
While considering investment options, the company’s growth trajectory and potential should not be overlooked. The same can also be said for other companies in the broader technology space, such as Watts Water Technologies (WTS), Manhattan Associates (MANH), and Microsoft (MSFT). These companies present viable investment alternatives, backed by their respective growth prospects and market performances.
Conclusion
Generac’s fourth-quarter report, while falling short of estimates in certain areas, lays the groundwork for a potential resurgence in the upcoming year. The company’s focus on residential product sales and the initiation of a new stock buyback program indicate a forward-thinking approach to its financial strategy. Investors would be prudent to consider these metrics when contemplating future investment opportunities.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
