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Generac Gains 28% in the Past Year: Will the Stock Maintain Pace in 2025?
Generac Holdings Inc. GNRC stock has surged 27.5% in the past year, outpacing the S&P 500 composite and the sub-industry’s growth of 11.1% and 24.7%, respectively.
Price Performance
Zacks Investment Research
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The stock is currently trading about 19% below its 52-week high of $195.94. This raises the question of whether this pullback signals a buying opportunity.
To determine if it is the right time to buy, sell or hold GNRC stock, we need to consider several key factors.
Increasing Demand for Generators to Drive GNRC’s Growth
Generac updated its sales expectations for 2024 owing to recent power outage activity. For 2024, it now expects revenues to increase 5-9% compared with the earlier guidance of 4-8%. Power outage activities have led to higher demand for Generac’s home standby and portable generators.
Generac has been making accretive investments in the production of home standby generators to meet the growing demand, supported by its strong operating and supply-chain capabilities. The company remains focused on expanding its residential dealer network, which reached 9,100 dealers by the end of the third quarter of 2024, indicating an increase of 400 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.
GNRC highlighted tremendous growth potential in the domestic market, where only approximately 6% of the addressable market of homes is currently equipped with residential standby generators. The low penetration rate signifies a big opportunity for growth, particularly as awareness of the need for backup power solutions continues to heighten amid volatile weather. GNRC expects an “outsized increase” in the Residential product division to partly offset weakness in the C&I business and Other product sales in certain end markets and geographies in 2024.
Strength in ecobee Bodes Well
ecobee recently launched the Smart Thermostat Essential, a budget-friendly option that maintains the brand's hallmark comfort and convenience. Featuring a sleek full-color touchscreen, this new device is easy to install, simple to use and offers substantial savings. In October 2024, ecobee expanded its Smart Security offerings by collaborating with leading smart lock manufacturers Yale and August. ecobee Smart Security is an innovative home monitoring solution that empowers users to take full control of their living spaces.
Before that, ecobee unveiled the Smart Thermostat Lite. This brings together insights from HVAC professionals and feedback from customers across various generations of ecobee thermostats, making it an easy-to-install and dependable option for professional installers while being a straightforward solution for users.
Smart product launches by ecobee are expected to drive revenues as consumers increasingly look for energy-efficient products. In November 2021, it became part of Generac.
Expansion Into Clean Energy & Battery Storage
Generac’s investments in clean energy solutions and home battery systems could pay off as more consumers seek to reduce their reliance on the grid. GNRC's acquisition of the PowerPlay Battery Energy Storage Systems unit from SunGrid Solutions and Ageto buyout is expected to boost its reach in the C&I energy storage market.
Favorable Long-Term Trends
Significant changes in the energy landscape, drastic climate change, aging power infrastructure and deployment of superfast 5G technology are likely to spur secular growth opportunities for Generac. The mega-trends have led Generac to formulate a new enterprise strategy, “Powering A Smarter World” in 2021. As a part of the strategy. The company has been working on developing residential and C&I ecosystems of connected energy solutions. This will help to address an increasing electricity supply-demand imbalance through improvement in energy resilience, optimizing energy efficiency and consumption, and protection and building of critical infrastructure.
The proliferation of artificial intelligence applications has caused a spurt in the construction of energy-intensive data centers. This is likely to spur demand for power consumption or backup power in the near future, which in turn is expected to put pressure on the aging power grids. Generac's backup power portfolio is well suited to provide a resilient power supply as demand for electricity continues to surge. Next-generation energy technology solutions across residential and C&I product categories are likely to boost resiliency value through improved cost effectiveness and higher comfort.
Investment in Wallbox bodes well for GNRC amid the increasing prevalence of EVs. With increasing EVs, the ability to manage EV charging as part of a broader energy management system will become increasingly important, offering Generac a new avenue for growth.
GNRC’s Valuation
Generac’s forward 12-month price-to-earnings ratio of 19.17X which is below the industry average of 20.83X observed in the past year.
Zacks Investment Research
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GNRC’s Troubled C&I Business is an Overhang
Generac’s C&I segment has shown signs of recovery, but the pace has not been as expected. Though increases in C&I product shipments through domestic industrial distributor channels were a tailwind, the core sales declined owing to weakness in domestic shipments for telecom, national equipment rental and beyond standby applications along with weaker market conditions in Europe.
Management now expects C&I and other product sales to be approximately $50 million, below its previous outlook, owing to soft market conditions in certain domestic regions as well as in Europe. C&I product sales are now expected to be down to high single digits year over year in 2024. The other sales category is forecasted to be nearly flat on a year-over-year basis for 2024.
How to Play GNRC Stock?
At present, GNRC flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Though the C&I segment's weakness is a concern, Generac’s strengthening residential business, strategic collaborations and synergies from tuck-in acquisitions bode well. Strong growth drivers and a 19% dip from the 52-week high may provide a more favorable entry point.
Apart from a favorable rank, GNRC has a Growth Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or 2 (Buy) and a Growth Score of A or B offer solid investment opportunities.
Other Stocks to Consider
Some other top-ranked stocks from the broader space are DXP Enterprise DXPE, InterDigital, Inc. IDCC and Five9, Inc. FIVN, each presently sporting a Zacks Rank #1.
The Zacks Consensus Estimate for DXPE’s 2024 and 2025 EPS is pegged at $4.07 and $4.31, respectively, which remained unchanged in the past seven days. Its shares have risen 62.5% in the past year. DXPE's shares have surged 167.2% in the past year.
The Zacks Consensus Estimate for IDCC’s 2024 earnings is pegged at $15.19 per share, which remained unchanged in the past seven days. IDCC’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 163.7%. Its shares have surged 81.9% in the past year.
The Zacks Consensus Estimate for FIVN’s 2024 EPS is pegged at $2.37, which remained unchanged in the past seven days. Five9’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 22.46%.
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