WAUKESHA, Wisc. - Generac Holdings Inc. (NYSE: NYSE:GNRC), reported its second-quarter financial performance, posting mixed results with a slight revenue shortfall but an earnings beat. The company reported Q2 adjusted earnings per share (EPS) of $1.35, surpassing analysts' expectations of $1.21. However, revenue for the quarter was marginally below the consensus estimate, coming in at $998.2 million against the anticipated $1 billion.
Generac's performance in the second quarter showcased resilience, with residential product sales climbing approximately 8% to $538 million compared to the same period last year. This growth was attributed to a robust demand for home standby generators, which offset a 10% decline in Commercial & Industrial (C&I) product sales, which fell to $344 million. The company's net income also saw a healthy increase, rising to $59 million, or $0.97 per share, from $45 million, or $0.70 per share, in the second quarter of 2023.
"Our second quarter results outperformed our prior outlook for adjusted EBITDA and adjusted EPS as input costs and operating expenses came in better than expected," said Aaron Jagdfeld, President and Chief Executive Officer. He also noted that the home standby generator shipments increased significantly compared to the previous year, while C&I products witnessed a decline due to expected weakness in telecom and rental markets.
Generac's gross profit margin improved notably to 37.6% from 32.8% in the prior-year second quarter, driven by favorable sales mix and the realization of lower input costs. Operating expenses rose by 12.3%, primarily due to increased employee costs and higher marketing spend.
Looking ahead, Generac has raised its full-year 2024 net sales growth guidance to 4 to 8%, up from the previous range of 3 to 7%. The adjusted EBITDA margin is now expected to be between 17.0 to 18.0%, an increase from the former estimate of 16.5 to 17.5%. This updated outlook follows the impact of major outage events like Hurricane Beryl, which the company anticipates will drive incremental demand for its products.
Jagdfeld expressed optimism about the future, citing the low penetration rate of home standby generators in the U.S. market and the opportunities for further growth. "With only approximately 6% penetration of the addressable market of homes in the U.S., we believe there are significant opportunities to further penetrate the residential standby generator market as the clear leader in this category," he stated.
Generac's financial health remains robust, with the company continuing to expect strong operating and free cash flow generation for the full year, with free cash flow conversion from adjusted net income well above 100%.
While the company did not disclose the stock's market movement following the earnings release, the positive adjustment in full-year guidance suggests confidence in its operational strategy and market position.
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