Generac Holdings (GNRC 2.54%), which makes backup power generators and other energy technology products, is slated to report its second-quarter 2022 results before the market open on Wednesday, Aug. 3. An analyst conference call is scheduled for 10 a.m. ET on the same day.
Investors will probably be approaching the report with mixed feelings. On the positive side, the company "continued to experience robust and broad-based growth during the first quarter, and strong execution pushed shipments to new records," as CEO Aaron Jagdfeld said in last quarter's earnings release. Indeed, investors were pleased with the first-quarter report, sending Generac shares up 11.8% following the release.
However, investors are undoubtedly concerned about the potential for a significant slowdown in the U.S. economy or a recession to hurt Generac's business.
And some investors could be uneasy about concerns and allegations highlighted in short-seller Spruce Point Capital Management's report on Generac in late June. The items were varied in nature, though a couple of them centered around Generac's acquisitions and partnerships in the renewable energy space.
I usually don't put much stock in short-seller reports. That said, if I were considering buying additional shares of Generac (I already own some shares), I would probably dig into the points in the short-seller's report. Investors who are considering buying shares also might want to do so.
With this background in place, here's what to watch in Generac's upcoming second-quarter report.
Image source: Getty Images.
Generac's key numbers
| Metric | Q2 2021 Result | Wall Street's Q2 2022 Consensus Estimate | Wall Street's Projected Change |
|---|---|---|---|
| Revenue | $920 million | $1.27 billion | 38% |
| Adjusted earnings per share | $2.39 | $2.63 | 10% |
Data sources: Generac and Yahoo! Finance.
Wall Street expects the second quarter's year-over-year revenue to grow much faster than its adjusted earnings. That's because, like most companies, Generac has been grappling with pandemic-driven supply chain disruptions and inflationary pressure on its input costs. These issues have been hurting its bottom line, and this dynamic likely continued in the second quarter. That said, the company has been partly offsetting the impact of rising costs by raising product prices.
For context, in the first quarter, Generac's revenue surged 41% year over year to a record $1.14 billion. Sales grew 33%, excluding the impact of acquisitions and foreign-currency exchange. By product class, residential sales jumped 43%, and commercial and industrial sales rose 38%.
Adjusted for one-time items, net income was $135 million, or $2.09 per share, down 12% from the year-ago period. This result topped the $1.94 Wall Street expectation.
NYSE: GNRC
Key Data Points
Annual guidance
Any notable changes to Generac's 2022 guidance would likely move the stock. Here is its current annual outlook:
- Revenue growth of 36% to 40%, which includes approximately 5% to 7% of positive net impact from acquisitions and foreign currency.
- Net income margin (net income divided by revenue), before deducting for noncontrolling interests, of 13% to 14%.
- A margin based on EBITDA (earnings before interest, taxes, depreciation, and amortization) of 21.5% to 22.5%.
