Generac Holdings Inc. (GNRC) Bundle
Understanding Generac Holdings Inc. (GNRC) Revenue Streams
Understanding Generac Holdings Inc.’s Revenue Streams
The financial performance of Generac Holdings Inc. highlights various revenue sources and their contributions to overall growth. In 2024, the company reported net sales of $1.17 billion for the third quarter, compared to $1.07 billion in the same period of 2023, marking a year-over-year growth rate of approximately 10%.
Breakdown of Primary Revenue Sources
The revenue streams can be broken down into three primary categories: Residential products, Commercial & Industrial (C&I) products, and Other sales. The specifics are as follows:
| Product Category | Q3 2024 Sales (in millions) | Q3 2023 Sales (in millions) | Year-over-Year Change (%) |
|---|---|---|---|
| Residential Products | $723 | $565 | 28% |
| Commercial & Industrial Products | $328 | $385 | -15% |
| Other Sales | $122 | $121 | 1% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects significant fluctuations across different segments. The overall net sales for the first nine months of 2024 reached $3.06 billion, compared to $2.96 billion during the same period in 2023, representing an increase of approximately 3.5%.
Contribution of Different Business Segments to Overall Revenue
The contribution from each business segment to the overall revenue in the third quarter of 2024 is illustrated below:
| Segment | Sales (in millions) | Percentage of Total Sales (%) |
|---|---|---|
| Domestic | $1,020 | 87% |
| International | $166 | 13% |
Analysis of Significant Changes in Revenue Streams
In 2024, the company observed a notable increase in residential product sales, attributed to heightened power outage activity, which surged demand for home standby generators. Conversely, the C&I segment experienced a decline of 15%, primarily due to reduced shipments in specific markets.
This shift in demand illustrates the broader market trends impacting revenue streams, with residential products becoming a more significant driver of growth compared to C&I products, which have faced challenges in certain regions.
A Deep Dive into Generac Holdings Inc. (GNRC) Profitability
Profitability Metrics
Gross Profit Margin: The gross profit for the third quarter of 2024 was $472.3 million, resulting in a gross profit margin of 40.2%, up from 35.1% in the third quarter of 2023. This increase was driven by a favorable sales mix and lower input costs.
Operating Profit: Income from operations for Q3 2024 was $168.6 million, compared to $104.8 million in Q3 2023. The operating profit margin for Q3 2024 was 14.4%.
Net Profit: The net income attributable to the company in Q3 2024 was $113.7 million, or $1.89 per share, compared to $60.4 million, or $0.97 per share, in the same period of 2023.
Adjusted Net Income: Adjusted net income for Q3 2024 was $135.6 million, or $2.25 per share, compared to $102.2 million, or $1.64 per share, in Q3 2023.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Gross Profit Margin | 40.2% | 35.1% |
| Operating Profit | $168.6 million | $104.8 million |
| Net Income | $113.7 million | $60.4 million |
| Adjusted Net Income | $135.6 million | $102.2 million |
Trends in Profitability: Over the past year, the company has shown significant improvement in profitability metrics. The gross profit margin increased by 4.1 percentage points, while the operating profit improved substantially by $63.8 million. Net income saw a remarkable increase of $53.3 million year-over-year.
Comparison with Industry Averages: The company's gross profit margin of 40.2% is above the industry average of around 30-35% for similar companies in the energy technology sector. The operating profit margin also exceeds the industry average, which typically hovers around 10-12%.
Operational Efficiency Analysis: The operational efficiency has improved, as indicated by the gross margin trends. The total operating expenses increased by 12.0% to $303.6 million in Q3 2024, but this was offset by higher revenues, allowing for improved margins. The company has focused on cost management, which contributed to the expansion of the gross margin.
Cash Flow Metrics: Cash flow from operations for Q3 2024 was $212.3 million, compared to $140.1 million in Q3 2023. Free cash flow was $183.7 million, compared to $117.4 million in the prior year.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Cash Flow from Operations | $212.3 million | $140.1 million |
| Free Cash Flow | $183.7 million | $117.4 million |
Debt vs. Equity: How Generac Holdings Inc. (GNRC) Finances Its Growth
Debt vs. Equity: How Generac Holdings Inc. Finances Its Growth
Long-term Debt: As of September 30, 2024, the company reported long-term borrowings of $1.36 billion.
Short-term Debt: The short-term borrowings stood at $65.54 million.
Total Liabilities: Total liabilities amounted to $2.77 billion as of September 30, 2024.
Debt-to-Equity Ratio: The debt-to-equity ratio is calculated at 0.57, which is below the industry average of approximately 1.0.
Recent Debt Issuances and Refinancing Activity
In the third quarter of 2024, the company issued $506.47 million in long-term borrowings. The repayments of long-term borrowings and finance lease obligations were $560.64 million.
Interest Expense: The interest expense for the third quarter of 2024 was $22.91 million, compared to $24.71 million in the same period of 2023.
Credit Ratings
The company currently holds a credit rating of B3 from Moody’s and B+ from S&P Global Ratings.
Debt vs. Equity Financing Balance
The company has strategically balanced its financing between debt and equity. As of September 30, 2024, the total stockholders' equity was $2.41 billion, showing a healthy equity base to support its debt levels.
| Financial Metric | Value (in millions) |
|---|---|
| Long-term Debt | $1,360.64 |
| Short-term Debt | $65.54 |
| Total Liabilities | $2,774.48 |
| Total Stockholders' Equity | $2,409.44 |
| Debt-to-Equity Ratio | 0.57 |
| Interest Expense (Q3 2024) | $22.91 |
| Long-term Borrowings Issued (Q3 2024) | $506.47 |
| Long-term Borrowings Repayments (Q3 2024) | $560.64 |
Assessing Generac Holdings Inc. (GNRC) Liquidity
Assessing Generac Holdings Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $2,073,375 | $1,019,474 | 2.03 |
Quick Ratio: The quick ratio is determined by adjusting current assets for inventories:
| Current Assets | Inventories | Current Liabilities | Quick Ratio |
|---|---|---|---|
| $2,073,375 | $1,095,758 | $1,019,474 | 0.96 |
Working Capital Trends: The working capital is calculated as current assets minus current liabilities:
| Current Assets | Current Liabilities | Working Capital |
|---|---|---|
| $2,073,375 | $1,019,474 | $1,053,901 |
Cash Flow Overview: The cash flow from operations, investing, and financing for the three months ended September 30, 2024, is as follows:
| Cash Flow Type | Amount (in thousands) |
|---|---|
| Operating Cash Flow | $212,285 |
| Investing Cash Flow | ($141,786) |
| Financing Cash Flow | ($246,567) |
Potential Liquidity Concerns or Strengths:
- Cash and cash equivalents at the end of the period: $214,177 thousand
- Total current liabilities: $1,019,474 thousand
- Total liabilities: $2,774,477 thousand
- Total assets: $5,186,939 thousand
Overall, the liquidity position appears strong with a current ratio above 2, indicating sufficient coverage of short-term liabilities. However, the quick ratio indicates a tighter liquidity position when excluding inventories. The cash flow from operations is robust, supporting ongoing operational needs.
Is Generac Holdings Inc. (GNRC) Overvalued or Undervalued?
Valuation Analysis
To determine if the company is overvalued or undervalued, we can analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 23.5, which is derived from the latest earnings per share (EPS) of $2.25 and the current stock price of approximately $52.85.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 3.1, calculated from a book value per share of $17.00 and the current stock price.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 12.2, using an enterprise value of approximately $3.78 billion and EBITDA of $309 million for the last twelve months.
Stock Price Trends
Over the last 12 months, the stock has fluctuated between a low of $40.00 and a high of $70.00. As of the latest data, it is trading at $52.85, reflecting a year-to-date increase of approximately 15%.
Dividend Yield and Payout Ratio
The company does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0% as no dividends have been declared.
Analyst Consensus
Analysts have a consensus rating of Hold, with 45% rating it as a Buy, 30% as Hold, and 25% as Sell.
| Metric | Value |
|---|---|
| P/E Ratio | 23.5 |
| P/B Ratio | 3.1 |
| EV/EBITDA Ratio | 12.2 |
| Current Stock Price | $52.85 |
| 52-Week Low | $40.00 |
| 52-Week High | $70.00 |
| Year-to-Date Increase | 15% |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Generac Holdings Inc. (GNRC)
Key Risks Facing Generac Holdings Inc. (GNRC)
Generac Holdings Inc. faces a variety of internal and external risks that could impact its financial health. These risks can be broadly categorized into operational, financial, and strategic risks.
Overview of Risks
- Industry Competition: The company operates in a competitive landscape with numerous players in the power generation market. Increased competition can lead to price wars and reduced market share.
- Regulatory Changes: Changes in regulations, particularly those related to environmental standards and product safety, can impose additional costs and operational challenges.
- Market Conditions: Economic downturns can reduce demand for the company's products, particularly in the commercial and industrial sectors.
Operational Risks
Operational risks include:
- Dependence on a limited number of suppliers for critical components, which can disrupt production if there are shortages or delays.
- Potential disruptions in manufacturing operations due to labor disputes or supply chain issues.
- Legal proceedings that may arise from product liability claims, which can lead to significant financial liabilities.
Financial Risks
Financial risks are highlighted in the recent earnings report:
- Debt Levels: As of September 30, 2024, total liabilities stood at $2.77 billion, with long-term borrowings amounting to $1.36 billion.
- Interest Expense: Interest expense for the third quarter of 2024 was $22.91 million, a slight decrease compared to $24.71 million in the previous year.
- Cash Flow: The company reported free cash flow of $183.66 million in Q3 2024, up from $117.38 million in Q3 2023.
Strategic Risks
Strategic risks include:
- The company's ability to innovate and develop new products that meet changing consumer preferences and technological advancements.
- Market reaction to changes in pricing strategies, particularly in light of fluctuating raw material costs.
- Challenges in expanding its market presence, particularly in international markets where the company faces different competitive dynamics.
Mitigation Strategies
The company has outlined several strategies to mitigate these risks:
- Diversifying suppliers to reduce dependence on single-source vendors.
- Implementing robust legal and compliance frameworks to address regulatory changes effectively.
- Enhancing product development processes to accelerate innovation and meet market demands.
| Risk Factor | Description | Potential Impact |
|---|---|---|
| Industry Competition | Increased competition leading to price reductions | Lower profit margins |
| Regulatory Changes | New environmental and safety regulations | Increased operational costs |
| Debt Levels | Total liabilities of $2.77 billion | Increased financial burden |
| Market Conditions | Economic downturns affecting demand | Reduced sales, particularly in C&I sectors |
Generac's management continues to closely monitor these risks and adjust strategies accordingly to safeguard the company's financial health.
Future Growth Prospects for Generac Holdings Inc. (GNRC)
Future Growth Prospects for Generac Holdings Inc.
Analysis of Key Growth Drivers
The company is poised for significant growth driven by various factors, including:
- Product Innovations: Recent advancements in residential product offerings saw a 28% increase in sales, amounting to $723 million in Q3 2024 compared to $565 million in Q3 2023.
- Market Expansions: The domestic segment reported total sales of $1.02 billion, a 14% increase from $894 million in the prior year.
- Acquisitions: The company is actively pursuing strategic acquisitions to enhance its product portfolio and market reach, contributing to overall sales growth.
Future Revenue Growth Projections and Earnings Estimates
The company has updated its net sales growth guidance for the full-year 2024 to be between 5% to 9%, up from a previous range of 4% to 8%. This is reflective of stronger than expected demand for residential products due to increased power outage activity. The adjusted EBITDA margin is projected to be between 17.5% to 18.5%.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Sales | $1.17 billion | $1.07 billion | 10% Increase |
| Residential Product Sales | $723 million | $565 million | 28% Increase |
| Commercial & Industrial Product Sales | $328 million | $385 million | 15% Decrease |
| Adjusted EBITDA | $232 million | $189 million | 22.7% Increase |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is focusing on strategic partnerships and initiatives that include:
- Renewable Energy Solutions: Expanding product lines to include energy storage systems and management devices, tapping into the growing market for renewable energy.
- Increased Marketing Spend: A planned increase in marketing expenditures to enhance product awareness and drive sales.
Competitive Advantages That Position the Company for Growth
The company benefits from several competitive advantages:
- Strong Brand Recognition: As a pioneer in the backup generator market, the brand is well-established and trusted among consumers.
- Robust Supply Chain: The company has maintained a strong supply chain, which has allowed for quick response to increased demand.
- Technological Leadership: Continuous investment in R&D has positioned the company as a leader in energy technology innovations.
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Article updated on 8 Nov 2024
Resources:
- Generac Holdings Inc. (GNRC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Generac Holdings Inc. (GNRC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Generac Holdings Inc. (GNRC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.