Why Generac Shares Powered Ahead

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of generator manufacturer Generac Holdings (NYSE: GNRC  ) surged 19% today after its quarterly results and guidance topped Wall Street expectations.

So what: The company's third-quarter beat -- adjusted EPS of $0.78 versus the consensus of $0.75 -- coupled with upbeat guidance for the full year, reinforces investor enthusiasm over demand going forward. Generac usually sees a big boost in sales after major power outages, as consumers realize the need for backup power, and today's report suggests that superstorm Sandy is sparking the same type of increased awareness.

Now what: Management now sees full-year adjusted EPS of $2.95-$3.00 on a revenue jump in the low 40% range, well above its view of $2.65-$2.70 in adjusted EPS, and top-line growth in the low 30% range. According to CEO Aaron Jagdfeld:

The events of the last few days continue to demonstrate for home owners and business owners the importance of having a backup plan for their power needs. Automatic standby generators have emerged as a cost effective and increasingly important part of those backup plans.

Given today's roughly 20% stock price surge, however, I'd be careful about getting too caught up in the short-term excitement.

Interested in more info on Generac? Add it to your watchlist.

Fool contributor Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Related Tickers

10/25/2016 2:55 PM
GNRC $36.46 Down -0.64 -1.73%
Generac Holdings CAPS Rating: ****