Generac Holdings ( NYSE: GNRC ) on Thursday touched a two-and-a-half-year low of $101.15 a share as investors weighed the company's Q3 results.
Its stock was maintained at an Outperform rating by analysts at Credit Suisse who said the maker of backup generators showed signs of future growth with its quarterly report.
The bank lowered its estimates of adjusted EPS for 2022 to $7.40 from $8.87, and for 2023 to $9.76 from $10.94 because of lower sales of home standby generators (HSBs) and narrower gross margins.
“Growth indicators such as in-home consultations remain healthy, pointing to demand growth once existing inventory build is addressed,” Maheep Mandloi, analyst at Credit Suisse, said in the Nov. 3 report. The bank lowered its price target for Generac to $165 from $181.
Generac on Wednesday reported Q3 results that were in line with a warning the company had issued on Oct. 19. Adjusted net income fell 26% from a year earlier to $112 million, or $1.75 a share, in Q3.
Revenue grew 16% from a year earlier to $1.09 billion in Q3. Residential sales expanded 9% to $664 million, while its commercial and industrial segment grew 20% to $311 million.
Generac is among the makers of building products that have been negatively affected by weakness in the housing market as the Federal Reserve raises borrowing costs to rein in inflation.
Investors who are optimistic about Generac’s future earnings potential point to the demand for generators and backup systems in regions where extreme weather strains power grids. The company's sales surged as the pandemic kept more people at home, but faded as health restrictions eased.
Generac this year had fallen 70% through the end of Nov. 2, compared with a 20% decline for the Standard & Poor’s 500 index ( SP500 ).
Credit Suisse estimates for Generac Holdings ( GNRC ), Nov. 3 | |||
Adjusted EPS | |||
New | Old | ||
2022E | $7.40 | $8.87 | |
2023E | $9.76 | $10.94 |
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Generac hits 2-1/2 year low while Credit Suisse keeps Outperform rating