Generac Holdings Stock Slumps After Q2 Revenue Decline, Lagging Annual Outlook - Here's Why

Generac Holdings Inc. GNRC reported a Q2 sales decline of 23% year-on-year to $1.00 billion, missing the consensus of $985.02 billion.

Adjusted EPS of $1.08, beating the analyst consensus of $1.16.

Residential product sales declined 44% Y/Y to $499 million. Commercial & Industrial product sales increased 24% Y/Y to $384 million.

The gross profit margin was 32.8%, down 260 basis points Y/Y. This decline in margin was primarily due to the significant impact of an unfavorable sales mix, partially offset by higher pricing and lower input costs.

Operating expenses increased $2.3 million, or 1.0%, as compared to the second quarter of 2022. 

"As expected, overall second-quarter sales declined from a strong prior year comparable period that included the significant benefit of excess backlog reduction for home standby generators," said Aaron Jagdfeld, President and Chief Executive Officer.

"While our expectations for the consumer environment are now softer than previously projected, we believe the long-term mega-trends that are driving awareness for backup power solutions are as compelling as ever," Jagdfeld added.

Outlook: Generac anticipates its full-year 2023 net sales to decline 10 to 12% compared to the prior year, which includes approximately 2% of net favorable impact from acquisitions and foreign currency. The previous revenue outlook was for a decline of 6 to 10%.

The EBITDA margin is now expected to be approximately 15.5 to 16.5% compared to the previous guidance range of 17.0 to 18.0%.

Price Action: GNRC shares are trading lower by 17.2% at $126.96 premarket on the last check Wednesday.