The shares of industrial, portable and home power generator manufacturer Generac Holdings (GNRC.US) are today the strongest gainers among the entire S&P 500. Following its Q3 results, the stock managed to break a disastrous downward streak, during which it virtually erased three years of rapid shares growth. The company maintained its full-year forecast, with EPS and revenue beating analysts forecasts.
Revenue: $1.07 billion vs. $1.04 billion forecasts
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Open account Try demo Download mobile app Download mobile appEarnings per share (EPS): $1.64 vs. $1.55 forecasts
- Net sales forecasts assume a 10 to 12% year-over-year decline in revenue (2% includes favorable impact from market acquisitions and exchange rate changes). Generac expects full-year 2023 net margin to be 5 to 6% vs. previous guidance of 6 or 7% and adjusted EBITDA margin to be 15.5 to 16.5%, in line with previous guidance. Wall Street had expected stronger, negative margin compression. Domestic segment sales fell 6% to $894.0 million, compared with $946.6 million in the year-earlier quarter. At the same time sales outside the U.S. rose 14% to $207.6 million compared to $182.5 million in the year-ago quarter.
- The company generated more than $140 million in operating cash flow compared to a $56 million loss in Q3 2022. KeyBanc stressed that the reduction in Generac's net margins appeared modest and likely reflects some expected slowdown in the economy. Part of today's increase is justified on the inventory reduction side. According to KeyBanc, solid third-quarter results and a nearly unchanged outlook relative to gloomy Wall Street expectations may give the company more room to push up its stock market valuation.
- Operating expenses fell by $2.6 million (0.9% y/y). At the same time, free cash flow was $117.4 million,-a significant increase from $73.5 million in Q3 of the previous year. Generac recorded also higher gross margin of 35.1%, compared to 33.2% Q3 2022. The increase was mainly due to lower resources and logistics costs. At the same time, provision for income taxes increased significantly y/y to $19.4 million (24.3% rate) from $11.6 million in the previous year *16.1% rate). Free cash flow amounted to $117.4 million, up significantly from negative $73.5 million FCF in Q3 2022.
After huge shares decline from 2021 peaks, selloff has stopped at 80 USD levels, near from covid-19 panic and it may be strong support for the bulls in the near term. Company doubled revenues from 1H 2020 but net profit margin declined from 11% in 2020 to near 4% levels which signal that profit headwinds may persist for longer in weaker economy conditions . Source: xStation5
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