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Why Generac Stock Soared on Tuesday

By Rich Smith - Feb 16, 2021 at 1:07PM

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Last week's earnings were fantastic -- so good, in fact, that Wall Street is still cheering today.

What happened

Shares of power generation equipment manufacturer Generac Holdings (GNRC -5.73%) surged in Tuesday trading, up 5.5% as of 12:25 p.m. EST. The proximate cause of investors' excitement: This morning, analysts at Stifel Nicolaus raised their price target on Generac shares from $213 to $340.

But it's the reason for the rating that's the real reason to get excited today.

Rising red stock arrow representing a stock going up drawn on a yellow background

Image source: Getty Images.

So what

Stifel raised its price target because Generac's fourth-quarter earnings release last week boasted numbers "meaningfully ahead of expectations on both the top and bottom lines," reports, and also because Generac forecast continued momentum in the new year -- sales growth of 25% to 30%.

Last week, analysts at Canaccord Genuity, JMP Securities, JP Morgan Chase, Oppenheimer, Roth Capital, and UBS were similarly enthused, positing price targets of anywhere from $350 to $383 for the stock (which currently costs about $345). And it's not hard to see why they are so excited. In last week's report, Generac announced sales growth of 29% in its fourth quarter of 2020 -- and 76% growth in profits. This was a huge improvement over full-year results, which were already not too shabby at 13% sales growth ($2.5 billion total) and 36% profit growth ($5.48 per share).  

Now what

And 2021 could be even better. Citing strong demand for home standby generators and "solar plus storage," Generac's prediction of 25% to 30% sales growth works out to sales of at least $3.1 billion, where Wall Street was expecting only $2 billion.

Furthermore, management predicts it will earn a net profit margin of at least 15% on those sales -- so perhaps as much as $7.40 per share in profit, or 35% growth at minimum.

Investors can't help but smile at numbers like these.

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Generac Holdings Inc. Stock Quote
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