Are the Lights About to Go Out on Generac?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Despite early predictions for a year of extreme weather, this hurricane season has instead turned out to be eerily quiet. Now, a company that benefits when the winds go up and the lights go out could see its earnings experience a similar bout of the doldrums.

Generac (NYSE: GNRC  ) , a manufacturer of generators for residential and commercial use, has been running hot this year due to higher demand for backup power, driven in large part by Superstorm Sandy, which ravaged the East Coast last year. 

Hurricane season runs from June to November, and for the quarter that ended just as the season was supposed to kick off, Generac reported that revenues surged 45% due to the lingering effects and memories of the damage of 2012. 

Although Generac says storms like Sandy actually only account for about half of the outages people experience, as a squirrel getting fried in the power lines is just as likely to cause a blackout, a typical year for the generator-maker still sees almost as much as two-thirds of its revenues coming in the third and fourth quarters, not coincidentally because that's when hurricane season is in high gear. 

Rival Briggs & Stratton (NYSE: BGG  ) saw a similar increase in sales of standby and portable generators due to the superstorm, which helped offset overall weakness experienced in engine sales. Meanwhile, Cummins (NYSE: CMI  ) , which is perhaps best known for its heavy-duty truck engines, was able to slightly offset declining revenues from mining and construction sector weakness with slightly higher sales of power generation systems.

Briggs & Stratton offered an earnings outlook for fiscal 2014 that relies on at least a single hurricane making landfall. While we still have a few weeks to go before hurricane season comes to a close, the clock is ticking down on that probability.

On the other hand, Generac revised its 2013 full-year guidance higher because of the strong push it saw earlier this year, but said it didn't need any additional major power outages to hit those targets.

While hurricane season might be in the doldrums this year (and for the past few years, for that matter), the aging power grid ensures we'll continue to have mass outages. Generac says that when they do occur, sales spike, and then stay at those higher levels until the next blackout, which means we can likely anticipate the company enjoying additional sales growth ahead.

Generac's shares doubled in value over the past year, hitting $44 a stub last month, before giving back some of those gains in the past few day. Though the likelihood of a major storm causing a catastrophe this year is now low, winter's coming -- and The Farmer's Almanac predicts a major blizzard for the Super Bowl!  I'd say any further weakness in Generac's stock might energize investors to pick up some shares.

6 ways to heat up your portfolio
Tired of watching your stocks creep up year after year at a glacial pace? Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars, WITH YOU! It's a special 100% FREE report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains... and click HERE for instant access to a whole new game plan of stock picks to help power your portfolio.

Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 23, 2013, at 5:02 PM, jpokergman wrote:

    Dude.....There are more reasons than just a lousy hurricane to have a robust back-up source of electricity these days. When the lights do go out, they tend to stay out longer than they used to. It seems that Utilities have cut back on crews, and when hit by a huge disaster, many crews from other parts of the U.S. and Canada are dispatched. This works well if only one disaster happens at a time.....But this Fool, knows it is just a matter of time before several hit at once. Such as a "Quake" in Cali. at the same time as a Cat 3 storm in the Gulf.

    Oh...And how does a "Quake" on the west coast have to do with the need for Generators? What a foolish question....Hmmmm Lets see what will happen to all those @home broadband connections? How long will it take a crew to restore Communications? How will people Recharge their Cell phones after 24 hr. ?

    Well golly Gee Batman......It seems oh so very smug folks don't seem to need back-up generators so long as they do not live near a sub-tropical environment.

    Here is my foolish prediction....The next time Northern or Southern California gets smacked with a serious Earthquake, Generac, will be trading 100 points higher within 12 days.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2677075, ~/Articles/ArticleHandler.aspx, 9/27/2016 4:41:51 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:02 PM
BGG $18.43 Up +0.17 +0.93%
Briggs and Stratto… CAPS Rating: ***
CMI $120.47 Up +0.24 +0.20%
Cummins CAPS Rating: *****
GNRC $34.69 Up +0.40 +1.17%
Generac Holdings CAPS Rating: ***