Generac Holdings Inc.
) reported weak results for the first quarter of 2014, with both
earnings as well as revenues declining year over year. Adjusted
earnings per share for the reported quarter came in at 72 cents,
missing the year-ago earnings by a significant 40.5%. Results
also missed the Zacks Consensus Estimate by a cent.
On a GAAP basis, Generac's earnings per share of 50 cents,
compared unfavorably with 73 cents reported in the first quarter
of 2013. The decline in earnings was primarily a result of
reduction in revenues.
Generac recorded net sales of $342.0 million, down 14.4% year
over year, primarily due to reduction in the Residential Products
segment. Reported revenues also missed the Zacks Consensus
Estimate of $352.0 million.
Revenues from Residential products dropped 35.7% year over
year to $164.0 million. The downside was primarily due to
unfavorable temperature and snow, resulting in delayed
installations and lower demand for home standby generators.
Moreover, first-quarter 2013 revenues were positively impacted by
The Commercial & Industrial products revenues grew 23.8%
year over year to $157.4 million due to increased contributions
from acquisitions as well as improvement in organic sales.
Cost of goods sold in the first quarter decreased 9.6% year
over year and represented 65.1% of total revenue, up from 61.6%
in the year-ago quarter. Gross margin fell by 350 basis points
year over year. As a percentage of total revenue, selling and
service, research and development, and general and administrative
expenses were 14.3% versus 12.7% in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and
amortization (EBITDA) margin were 22.7%, registering 450 basis
points (bps) year-over-year decline.
Exiting the first quarter of 2014, Generac's cash and cash
equivalents stood at $173.7 million versus $150.1 million in the
preceding quarter. Long-term borrowings and capital lease
obligations were $1,172.4 million, down marginally from $1,175.3
million in the fourth quarter of 2013.
In the reported quarter, Generac garnered roughly $36.4
million cash from operating activities, down nearly 5.0% year
over year. Capital spending increased 14.0% year over year to
$4.9 million. Lower cash flow and higher capital expenditure led
to 7.4% decline in free cash that came in at $ $31.4 million.
Based on the current results, management reiterated its
expectations for 2014. Sales in 2014 are expected to grow in the
mid single-digit range year over year. Generac expects gross
margin to decrease roughly 100 bps year over year in 2014, while
operating expenses, as a percentage of sales, are anticipated to
increase 100 bps year over year. Adjusted EBITDA margin is
expected in the mid-20% range.
Other Stocks to Consider
Generac currently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks worth considering in the industry include
Altra Industrial Motion Corp.
). While Gormun-Rupp sports a Zacks Rank #1 (Strong Buy), IDEX
and Altra Industrial Motion have a Zacks Rank #2 (Buy).
ALTRA HOLDINGS (AIMC): Free Stock Analysis
GENERAC HOLDING (GNRC): Free Stock Analysis
GORMAN RUPP CO (GRC): Free Stock Analysis
IDEX CORP (IEX): Free Stock Analysis Report
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