BofA Downgrades Generac On Supply Chain Woes

Although Generac Holdings Inc’s GNRC longer-term prospects remain bright and the demand for its products continues to boom, the company is being impacted by supply chain constraints, according to BofA Securities.

The Generac Holdings Analyst: Ross Gilardi downgraded the rating for Generac Holdings from Buy to Neutral, while keeping the price target unchanged at $500.

The Generac Holdings Thesis: The company reported its third-quarter EBITDA short of the consensus estimate and reduced its 2021 guidance citing “supply-driven cost constraints around raw materials, logistics, etc,” Gilardi said in the downgrade note.

“GNRC has several rounds of pricing going into effect, but gross margin may not recover to 1H21 levels until 2H22,” the analyst wrote.

“The other challenge for working down the HSB backlog in 2022 is dealer installation capacity,” he added.

While it is “very difficult” to downgrade from the Buy rating “in the face of such overwhelming growth rates, ongoing expansion in Generac’s addressable market, and some of the most powerful long-term thematics for any stock we’ve ever covered,” it seems unlikely there will be positive earnings revisions for at least another two to three quarters, Gilardi commented.

GNRC Price Action: Shares of Generac Holdings had declined by 6.24% to $453.40 at the time of publication Wednesday.

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