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Shares of Generac Holdings (NYSE:GNRC) have dropped by 8% in early trading on Thursday after the power generator manufacturer badly missed Wall Street's targets in its third-quarter earnings report.
Why it's happening
Generac's top and bottom lines both declined on a year-over-year basis. Revenue fell 3% to $352.3 million for the quarter, which was far below the $408.2 million consensus of Wall Street analysts. Generac's adjusted net income was down 22% to $0.83 per share, $0.20 below Wall Street's $1.03 target. Generally accepted accounting principles EPS was $0.52 per share.
All of Generac's major financial metrics showed year-over-year declines. Residential product sales were down due to lower demand for portable generators. Commercial sales fell because Generac's major telecom customers tightened their belts. EBITDA dropped, as did free cash flow. As a result of this quarterly weakness, Generac is now guiding full-year revenue to a middle single-digit decline over last year's result, with adjusted EBITDA margins in the low-to-mid-20% range.
Generac now expects to earn roughly $355 million in the fourth quarter, based on the three quarters of revenue already reported and assuming that full-year revenue will be down by 5% from last year's $1.49 billion result. Both of these figures are substantially below analyst expectations for the fourth quarter and the full year: Wall Street had modeled $416.5 million for the former period and $1.53 billion for the latter.
Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Generac Holdings. The Motley Fool owns shares of Generac Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.