Generac Holdings (GNRC -3.90%), which makes backup power generators and other energy technology solutions, is slated to report its fourth-quarter and full-year 2021 results before the market open on Wednesday, Feb. 16. An analyst conference call is scheduled for 10 a.m. ET on the same day.
The company is heading toward its release on a mixed note. Last quarter, it beat Wall Street's earnings consensus estimate but missed the revenue expectation. Moreover, it also edged down its full-year guidance for net income margin.
In 2022, Generac stock is struggling, like many other highly valued stocks, due in part to the expectation that the Federal Reserve will raise interest rates several times this year. It's down 20.5% this year through Feb. 4. The S&P 500 and Nasdaq Composite indexes are down 5.6% and 9.9%, respectively, over this period.
Generac stock, however, remains a winner over the medium and longer terms. Over the three-year period through Feb. 4, it's up a whopping 430% -- more than four times the S&P 500's return and nearly six times the Nasdaq's return.
Here's what to watch in Generac's upcoming fourth-quarter report.
Generac's key quarterly numbers
Q4 2020 Result
|Wall Street's Q4 2021 Consensus Estimate||Wall Street's Projected Change (YOY)|
Adjusted earnings per share (EPS)
Generac didn't provide guidance for the fourth quarter per se, though last quarter, it did update its full-year 2021 outlook. For 2021, management maintained its revenue growth expectation of 47% to 50% year over year. It edged down its outlook for net income margin before deducting for noncontrolling interests to approximately 15%, from 15.5% to 16%.
In last quarter's earnings release, the company cited the reasons for slightly lowering its outlook for this profitability metric as "additional supply chain constraints, escalating logistics challenges, and rising input costs," along with "the impact of recent acquisitions."
For context, in the third quarter, Generac's revenue surged 34% year over year to a record $942.7 million. Sales grew 30%, excluding the impact of acquisitions and foreign currency exchange. By product class, residential sales (which accounted for 65% of total sales) rose 33%, and commercial and industrial sales jumped 47%.
Last quarter, earnings based on generally accepted accounting principles (GAAP) increased 6% year over year to $1.93 per share. Adjusted for one-time items, EPS rose 13% to $2.35.
Wall Street was expecting adjusted EPS of $2.32 on revenue of $960 million. So the company slightly exceeded the profit expectation, but fell considerably short on the top line.
Demand wasn't the issue, however, as the company characterized demand for its products as "exceptional." Pandemic-driven supply chain constraints, which have been plaguing many companies, prevented Generac from fully meeting demand. Backlog increased in the third quarter.
As usual, management's guidance should be particularly important because the market looks ahead.
For the first quarter of 2022, Wall Street is modeling for adjusted EPS to increase 7% year over year to $2.54, and revenue to jump 31% to $1.06 billion.
For the full-year 2022, analysts are expecting adjusted EPS of $11.58 on revenue of $4.71 billion.