Generac Holdings Inc. GNRC has recently reported better-than-expected fourth-quarter 2024 results, wherein adjusted earnings per share (EPS) of $2.80 and net sales of $1.23 billion beat the respective Zacks Consensus Estimate by 12% and 0.1%, respectively.

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On a year-over-year basis, net sales increased 16% while adjusted EPS surged 35.3%. The increase in Residential product sales offset soft Commercial & Industrial (“C&I”) product sales. GNRC’s efforts to boost production to meet higher demand for home standby and portable generators amid increasing power outage activity was the primary tailwind.

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Following the announcement on Feb. 12, shares are up 3.6%. The stock has gained 21.6% compared with the Manufacturing-General Industrial industry’s growth of 7%.

(Read more: Generac's Q4 Earnings & Revenues Surpass Estimates, GNRC Stock Up)

Momentum in Residential Products Sales Bodes Well for GNRC

In the last reported quarter, revenues from Residential surged 28% year over year to $743 million. The Zacks Consensus Estimate for Residential products’ fourth-quarter revenues was pegged at $771 million.

Its efforts to boost production to meet higher demand for home standby and portable generators amid increasing power outage activity was the primary tailwind. Higher shipments of residential energy technology products (ecobee and Energy Storage systems) were another catalyst. Home standby shipments grew at a mid-20% rate from the previous year due to elevated outage activity in the latter half of the year. Management highlighted a record increase in home consultations in the second half of 2024.

Generac remains focused on expanding its residential dealer network, which reached 9,200 dealers by the end of 2024, indicating an increase of 500 dealers from the end of 2023. This expansion enhances the company’s ability to meet the growing demand for home standby generators and boost its market reach.

Generac Holdings Inc. Price, Consensus and EPS Surprise

Generac Holdings Inc. price-consensus-eps-surprise-chart | Generac Holdings Inc. Quote

New product launches (including PWRcell 2 MAX and our next-generation home standby generators), along with significant investments in boosting manufacturing capacity, are likely to drive revenues going forward.

For 2025, Residential Product sales are expected to be in the mid-to-high single-digit range, driven by shipments of home standby generators and residential energy technology solutions. Home standby generators are expected to have increased for the full year. Residential energy technology solutions’ revenues are projected to be between $300 million to $400 million for the year. Ecobee is anticipated to deliver positive profitability for the full year.

GNRC’s Improving Profitability

Margin performance was driven by a favorable sales mix, lower input costs and production efficiencies. Gross profit was $501.4 million, up from $388.7 million in the prior-year quarter, with respective margins of 40.6% and 36.5%. Gross profit margin performance gained from a favorable sales mix and lower input expenses.

Operating income was $198 million, up 31.2% year over year. Adjusted EBITDA, before deducting for non-controlling interests, was $265 million compared with $213 million a year ago.

Looking ahead to 2025, Generac expects to maintain margin expansion, projecting a 100-basis-point increase in gross margins due to lower input costs.

Weak C&I Segment: A Concern for GNRC

Softness in C&I sales remains concerning. C&I revenues totaled $363 million in the fourth quarter, unchanged year over year. Increases in the domestic industrial, distributor and telecom channels were offset by weakness in other C&I end markets. The Zacks Consensus Estimate for fourth-quarter revenues was pegged at $341 million

Further, management expects 2025 C&I sales to be flat year over year. This is mainly because growth from telecom C&I BESS and data center opportunities is likely to be offset by declines in rental beyond standby and domestic industrial distributor shipments. Sales are also expected to be affected by a slight unfavorable impact from the net effect of foreign currency. For the first quarter, C&I sales are expected to be down in high single digits.

A Look at GNRC’s Cash Profile

In the fourth quarter, the company generated $339 million of net cash from operating activities. Free cash flow totaled $286 million.

As of Dec. 31, 2024, GNRC had $281.3 million of cash and cash equivalents, with nearly $1.211 billion of long-term borrowings and finance-lease obligations.
In 2024, the company repurchased shares worth $153 million. GNRC had shares worth $347 million left under its buyback authorization as of Dec. 31, 2024.

In February 2024, GNRC had approved a new share buyback authorization that allows for a repurchase of up to $500 million in the next 24 months. It replaced the remaining balance on the earlier program.

GNRC’s Zacks Rank

Generac currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Performance of Other Companies in the Same Space

RBC Bearings Incorporated’s RBC third-quarter fiscal 2025 (ended Dec. 28, 2024) adjusted earnings of $2.34 per share beat the Zacks Consensus Estimate of $2.20. The figure increased 26.5% from the year-ago adjusted earnings of $1.85 per share, supported by higher revenues. RBC’s revenues were $394.4 million, which increased 5.5% year over year. However, the figure missed the Zacks Consensus Estimate of $401 million.

Dover Corporation DOV has reported fourth-quarter 2024 adjusted EPS from continuing operations of $2.20, beating the Zacks Consensus Estimate of $2.08. In the year-ago quarter, the company reported an adjusted EPS of $2.18 (excluding after-tax purchase accounting expenses and after-tax gain on disposition of a minority-owned equity method investment). On a reported basis, Dover has delivered earnings of $1.72 per share in the quarter, down 7% year over year. Total revenues in the fourth quarter increased 1.3% year over year to $1.93 billion. The top line missed the Zacks Consensus Estimate of $1.98 billion. Organic growth grew 0.3% in the quarter.

Applied Industrial Technologies AIT reported second-quarter fiscal 2025 (ended Dec. 31, 2024) earnings of $2.39 per share, which surpassed the Zacks Consensus Estimate of $2.22. The bottom line increased 6.7% year over year. Net revenues of $1.07 billion missed the consensus estimate of $1.08 billion. The top line inched down 0.4% year over year. Acquisitions boosted the top line by 1.9%, while foreign-currency translation had a negative impact of 0.5%. Organic sales decreased 3.4% year over year. Selling days had a favorable impact of 1.6%.

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