What happened

It seems that a revenue miss wasn't enough to deter Generac (GNRC 2.46%) investors from picking up shares this week. While the company failed to meet analyst's top-line expectations, it provided an Q4 2022 earnings beat, reporting adjusted EPS of $1.78 instead of the $1.76 that analysts expected. Other bright spots in the report also helped to lift shares of the mobile generator manufacturer higher this week.

As of the end of Thursday's trading session, shares of Generac have risen 11.4% since last Friday, according to data provided by S&P Global Market Intelligence.

So what

While Generac faced headwinds in 2022, management suggested on the conference call that the company is well positioned for success in 2023. Speaking to the strength of the commercial and industrial (C&I) segment as a source of the company's potential for growth, Aaron Jagdfeld, the company's CEO, recognized that:

Sales of our C&I products have never been stronger, as global shipments grew 26% over the prior year, resulting in $1.26 billion in annual sales. We exited 2022 with record backlog for these products, setting our expectations for another strong year in 2023.

Providing an additional source of excitement for investors, management forecast the company would return to strong cash flow generation in 2023. In the company's earnings announcement, management stated its belief that "operating and free cash flow generation is expected to return to strong levels for the full year, with conversion of adjusted net income to free cash flow expected to be well over 100%."

Positive outlooks on the stock from Wall Street provided extra motivation for investors to click the buy button. On Thursday, Stifel hiked its price target on Generac's stock to $130 from $98, and Baird raised its price target to $136 from $119.

Now what

Between the company's record backlog at the end of 2022 and the auspicious outlook for 2023 free cash flow, it's unsurprising that investors have been charged up about Generac's shares this week. Prospective investors should tread carefully though, confirming the company's progress in future earnings reports.