Piper Sandler maintained its Overweight rating on Generac Holdings (NYSE:NYSE:GNRC) with a steadfast $175.00 price target. The firm's position follows a recent virtual webinar with Generac's management, which covered various business segments including residential generators, commercial and industrial generators, and stationary storage.
During the webinar, management noted that year-to-date power outages, excluding the impact of Beryl, are on par with long-term expectations that support the company's guidance. Generac anticipates ending 2024 with gross margins around 39%, buoyed by a mix of higher-margin home standby generators and favorable price-cost dynamics. The company also hinted at the potential for favorable margin revisions.
In the commercial and industrial sector, Generac's core business is reportedly doing well, despite broader economic indicators suggesting a downturn. This success is attributed to market share gains. However, key segments like telecom, rental, and standby generators are experiencing cyclical declines, with rebounds anticipated in 2025 and 2026.
Generac has also introduced second-generation products in the stationary storage market at the Renewable Energy Plus (RE+) event. While the company has confidence in its product lineup and distribution strategy, it acknowledged that regaining traction in this segment might be a gradual process.
Piper Sandler concluded that Generac's conservative market expectations and attractive valuation relative to its industrial peers continue to make the stock a favorable option for investors.
Generac Power Systems has successfully completed the acquisition of Ageto, a firm known for its advanced microgrid controllers. This acquisition will enhance Generac's offerings in the commercial and industrial sector by integrating Ageto's technology into its energy systems. Ageto's microgrid controllers, which manage a mix of conventional power sources, renewable energy, and electric vehicle chargers, complement Generac's existing solutions.
Generac Holdings reported steady net sales of $998 million in the second quarter of 2024, matching the previous year's figure. Despite an 8% growth in residential product sales, a 10% fall in Global Commercial & Industrial product sales was observed. Generac's gross profit margin improved to 37.6%, and adjusted EBITDA for the quarter stood at $165 million.
Generac has raised its full-year outlook for 2024, citing increased demand following power outage events. The company is investing in distribution, advertising, and production to meet demand and has made a $35 million minority investment in Wallbox (NYSE:WBX) to expand its EV charging solutions.
InvestingPro Insights
Generac Holdings (NYSE:GNRC) has been the subject of positive attention from analysts, with 16 of them revising their earnings upwards for the upcoming period, signaling confidence in the company's performance. This optimism is reflected in the company's share price, which has seen a significant uptick of 26.17% over the last six months, as of the latest data. Investors may find additional value in Generac's current trading position, as it is at a low P/E ratio relative to near-term earnings growth, with a P/E ratio of 36.98 and an adjusted P/E ratio for the last twelve months as of Q2 2024 standing at 35.82.
Generac operates with a moderate level of debt and has liquid assets that exceed its short-term obligations, presenting a balanced financial posture. While the company does not pay a dividend, its profitability over the last twelve months and analysts' predictions of continued profitability this year could be compelling for growth-oriented investors. For those looking to delve deeper into Generac's financials, InvestingPro provides additional insights, including the fact that there are more tips available on their platform, offering a comprehensive analysis for informed investment decisions.
For a deeper dive into Generac's financial health and future prospects, visit https://www.investing.com/pro/GNRC to explore the full range of InvestingPro Tips and metrics.
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