Generac (GNRC) powering down after disappointing guidance, but longer-term outlook still electrifies
3:25 pm Wednesday, September 29th, 2021
Generac (NYSE:GNRC) is powering down today after the manufacturer of generators and energy storage systems provided updated FY21 guidance in its Investor Day presentation slides. The company essentially reaffirmed the revenue guidance it provided in its Q2 earnings report on July 28, which called for sales of $3.652-$3.728 bln. Today’s forecast of $3.7 bln in revenue falls within that range and is mainly inline with analysts’ $3.72 bln projection, making the steep sell-off seem somewhat surprising.
However, with GNCR beating top and bottom-line estimates for seventeen consecutive quarters, investors’ expectations have skyrocketed, as evidenced by the stock’s 87% year-to-date surge. Therefore, the guidance is viewed as disappointing, especially in the aftermath of Hurricane Ida in late August, which should have provided a major catalyst. It’s possible, though, that the company is attempting to manage the lofty expectations by offering a conservative outlook.
One issue working against that theory is that shipping delays and/or component shortages could be impacting GNRC. During the Q2 earnings conference call in late July, CEO Aaron Jagdfeld noted that the company faced significant logistic challenges and various capacity constraints. Since then, supply chain disruptions have intensified for many companies.
From a demand standpoint, there’s little reason to believe that conditions have softened. To the contrary, business has been booming for GNRC, fueled by a number of potent secular trends. First and foremost, increasingly extreme weather, combined with decreasing energy infrastructure reliability, has made back-up power a necessity rather than a luxury for many households. This viewpoint has only strengthened since the pandemic hit as more people work and learn from home.
Another key factor working in GNRC’s favor is the electrification of everything, ranging from cars, to HVAC systems, to appliances. Rising consumer acceptance of electric vehicles (EVs) in particular should generate strong growth in the years ahead, as highlighted yesterday by Ford’s (F) $11.4 bln investment in two new EV campuses.
