3 I's Of Why You Should Own Generac: Irma, International, Industrial

Generac Holdings Inc. GNRC, an American manufacturer of backup generators, has been thrust into the investor spotlight again after Hurricane Irma.

One week after the Category 5 hurricane decimated Florida, over 2.5 million households in Florida and surrounding states are still left without power. Floridians who hunkered down to withstand Irma’s plight relied on backup generators to make it through the week.

With millions of evacuees return to their homes unbeknownst to their condition, Bank of America analyst Ross Gilardi believes a pickup in home standby generator demand is inevitable. As a result, Gilardi upgraded the stock from Neutral to Buy, with a price objective of $50.

Beyond growing demand domestically, internationally the company also seeing a sizeable opportunity, with Gilardi expecting international EBITDA margins to double year over year in the second half of 2017.

Generac’s industrial business is also seeing an uptick, with equipment rental companies buying again on improved pricing and tightening market conditions.

“A major hurricane rebuilding effort forthcoming in TX and Florida could also lead to stronger demand for the Mobile products business,” said Gilardi.

The analyst raised 2018-2019 EBITDA estimates by 7-10 percent and increased his price target from $45 to $50.

Shares closed Friday up nearly 5 percent at $45.28.

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Can Generac Hold Its Charge After Harvey And Irma?