What happened

The Dow Jones Industrial Average and S&P 500 were heading south today, but shares of Generac Holdings (GNRC 1.48%) headed in the opposite direction thanks to a strong fourth-quarter 2021 earnings report. Analysts expected the supplier of generators and smart energy solutions to book revenue of $1.02 billion and adjusted earnings per share (EPS) of $2.40, but Generac Holdings reported sales and adjusted EPS of $1.07 billion and $2.51, respectively.

As of 10:45 a.m. ET on Wednesday, shares of Generac Holdings were up 10.3%.

A woman pours gas into a generator.

Image source: Getty Images.

So what

Beyond those headlines, investors are finding more reasons to like Generac. During the earnings presentation, for example, management announced that it is "initiating guidance for 2022 that anticipates another year of exceptional revenue growth as compared to the prior year." The company reported a record $3.74 billion in net sales for 2021, and it expects that high-water mark to not last very long, forecasting net sales growth of 32% to 36% for 2022.

Investors might also be celebrating the company's commitment to returning capital to shareholders. It announced that during the fourth quarter of 2021, it bought back 350,000 of its shares, valued at about $126 million. And it has $124 million left in its share repurchase program.

Now what

While Generac Holdings reported a strong quarter, it's worth noting that the company continued to suffer from supply chain challenges that affected its free cash flow. Whereas the company reported free cash flow of $191 million in the fourth quarter of 2020, it generated only $42 million in the same quarter of 2021. Prospective investors will want to monitor this closely in the ensuing quarters, as well as whether the company succeeds in achieving its sales and EPS guidance.