Hurricanes destroy but may actually help pull Generac Holdings' share price higher.
As a backup power generation equipment manufacturer with a market share greater than 70%, Generac could see a demand increase in the storm season, which might positively impact its stock price.
The 2024 hurricane season is expected to be "significantly more active" than previous ones, with an increase in the number of storms and their intensity, according to the company.
Additionally, a survey by The Harris Poll indicates that many Americans are not adequately prepared for widespread power outages.
Related: GE Aerospace CEO flags troublesome trend hurting its pockets
Generac CEO Aaron Jagdfeld said they are well-prepared in terms of supply chain. “We've been doing this for a long time…we have to plan as if there's going to be a season, and there generally is,” said Jagdfeld in an interview with Yahoo Finance in April.
The company announced on July 17 that it received a grant of up to $200 million from the U.S. Department of Energy’s Puerto Rico Energy Resilience Fund. The funds will support installing solar and battery storage systems for disadvantaged households in Puerto Rico starting in August 2024.
Generac has a long history of providing power in Puerto Rico.
“We’ve been providing reliable backup power solutions to the people of Puerto Rico for more than 20 years, including after Hurricane Maria devastated the island's power grid and left 95% of residents without electricity,” said Jagdfeld.
Houston Chronicle/Hearst Newspapers via Getty Images/Getty Images
Generac quarterly earnings on deck
Generac is expected to post earnings per share of $1.21 on a revenue basis of $1 billion for the second quarter. The previous quarter's results were $0.39 per share and $889 million in revenue, both higher than forecast.
Related: Analyst resets Tesla stock price target on full-service driving future
The company’s overall residential product sales, its biggest segment, were up 2% but fell short in the first quarter due to weaker domestic energy storage and EV markets.
Generac anticipated these challenges would affect the growth of residential product sales for 2024, according to Jagdfeld in Q1’s earnings call.
The company’s operating cash flow in the first quarter reached a healthier level, which was $112 million compared to $(19) million in the prior year. Generac maintained its full-year 2024 net sales outlook of 3% to 7% growth.
On July 15, the company launched its first electric vehicle charger, which is compatible with all vehicles in North America, including Tesla, with an adapter.
“Generac's expansion into the EV charging market shows our dedication to advancement in energy management," said Kyle Raabe, executive vice president of Consumer Power at Generac.
Analysts raise price target on strong demand
Scotiabank raised the firm's price target on Generac to $160 from $147 and kept a Sector Perform rating on July 29.
More Wall Street Analysts:
- Analyst revisits Nvidia stock price target after Blackwell checks
- Analysts prescribe new Walgreens stock price targets after earnings
- Analyst revises Facebook parent stock price target in AI arms race
The analyst anticipates sequential revenue growth from Q1 due to strong demand and a favorable mix. Analysts also expect potential improvements in the second half of 2024 guidance following Hurricane Beryl and other severe weather events.
Two weeks earlier, JPMorgan and Canaccord raised the company’s price target following the EV charger launch and the $200 million award to $155 from $149 and $177 from $150, respectively.
Investors have mixed opinions toward Generac. The company's largest institutional holder, Vanguard, decreased its position by 0.8% during the first quarter, according to a recent filing with the SEC. Vanguard owned 11.24% of Generac shares as of March 2024. Meanwhile, Capital World Investor, another top institutional holder, raised its holdings in Generac by 2.1% in the first quarter.
Related: Veteran fund manager sees world of pain coming for stocks
