Generac
stock has had a tough run as it has worked through channel inventory issues. Third-quarter earnings were a relief for investors.
Wednesday morning, standby power and services company
Generac
(ticker: GNRC) reported adjusted third-quarter earnings of $1.64 a share from sales of $1.1 billion. That beat the expectations of Wall Street analysts, who were looking for earnings of $1.55 a share and revenue of $1 billion, respectively.
Shares rose 15.7% in morning trading. The
S&P 500
was up 0.6%.
In the third quarter of 2022, Generac reported EPS of $1.75 from sales of $1.1. billion.
CEO Aaron Jagdfeld said in a news release that the results demonstrate improving operating performance and inventory levels.
“We experienced a strong sequential increase in shipments of home standby generators during the quarter as higher activations are driving field inventories towards more sustainable levels,” Jagdfeld said. “In addition, in-home consultations for these products also remained strong during the quarter as category awareness continues to increase on the back of well-publicized grid stability concerns.”
Inventories at sustainable levels were the key concern for investors. Generac stock fell about 20% after warning in October 2022 that third-quarter earnings would be lower than Wall Street expected because of high dealer inventory levels that led to those dealers not ordering new products.
Shares were trading around $175 each before that warning. They came into Wednesday trading at about $84.
Barron’s wrote positively about Generac stock in September 2022, believing that sales would grow over the long run as more homes added standby power generation. We missed the impact of dealer inventories on sales growth in 2023.
Before the warning, Wall Street projected about $5.5 billion in 2023 sales. That number will come in at about $4 billion. Wall Street expects growth to return in 2024, with sales reaching 2022 levels by 2024.
For the quarter just reported, sales of residential products were still down 15% from the same time last year, but that also shows signs of improvement. Sales of residential products were down about 44% in the second quarter from the year earlier.
Things are getting better, slowly.
Write to Al Root at [email protected]
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