Generac Shares Slide As Q3 Earnings Miss Estimates, Notes Margin Pressure

Generac Holdings Inc GNRC reported third-quarter FY21 sales growth of 34% year-on-year, to $942.7 million, missing the analyst consensus of $960.53 million. Core sales growth was 30%.
Residential product sales grew 33% to $609 million, and Commercial & Industrial (C&I) product sales increased 47% to $258 million.
Domestic segment sales increased 30% to $790.8 million, and the International segment rose 61% to $151.9 million.
Adjusted EPS of $2.35 missed the analyst consensus of $2.36.
The gross profit increased to $335.9 million, while the gross profit margin contracted by 380 basis points Y/Y to 35.6%, pressured by higher input costs due to rising commodity prices, labor, logistics, and plant start-up costs.
Operating expenses increased by 34.8% Y/Y to $162.4 million. The operating margin was 18.4%, and operating income for the quarter rose 11.5% to $155.6 million. Adjusted EBITDA of $209 million rose 17% Y/Y.
Cash flow from operations totaled $74 million with a free cash flow of $42 million. The company held $423.7 million in cash and equivalents as of September 30, 2021.
Generac announced yesterday that it agreed to acquire ecobee Inc. in a transaction valued up to $770 million contingent on achieving specific performance targets.
Outlook: Generac is maintaining its full-year 2021 net sales growth guidance range of 47% - 50% compared to the prior year, which includes approximately 5% of favorable impact from acquisitions and foreign currency.
The company lowered its FY21 net income margin, before deducting for non-controlling interests, to be 15.0% (prior view 15.5% - 16.0%), adjusted EBITDA margin to be 23.5% (previous view 24.5% - 25.0%).
Price Action: GNRC shares are trading lower by 5.52% at $477.89 on the last check Tuesday.

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