Generac Holdings Inc.
) posted impressive results for the second quarter of 2013. The
company's adjusted earnings per share came in at 95 cents, up a
whopping 63.8% over the year-ago quarter. Results also surpassed
the Zacks Consensus Estimate of 76 cents.
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Earnings outperformance can be attributed to increased sales and
improved margins in the quarter.
Generac generated net sales of $346.7 million, up 45% year over
year driven by increased demand from households for backup power
and the acquisition of Ottomotores.
Revenues from Residential products increased 59.3% year over year
to $196.6 million due to increased demand for home stand by and
portable generators. Revenues derived from Commercial &
Industrial products increased 32.0% to $133.4 million, driven by
the acquisition of Ottomotores as well as increased sales of
natural gas generators.
Cost of goods sold in the second quarter increased 42.2% year
over year and represented 62.2% of total revenue, down from 63.4%
in the year-ago quarter. Selling and service, R&D and G&A
expenses combined together as a percentage of total revenue,
stood at 13.9% versus 15.9% in the year-ago quarter. Operating
margin in the quarter was 22.0%, up from 15.5% in the year-ago
Exiting the second quarter of 2013, Generac's cash and cash
equivalents stood at $126.6 million versus $54.3 million in the
preceding quarter. Long-term debt increased 52.8% to $1,177.3
million versus $770.7 million in the previous quarter.
In the second quarter, Generac generated roughly $36.1 million
cash from operating activities that was up nearly 71.1% year over
year. Capital spending rose 70.2% to $5.7 million. It increased
free cash flow by 70.8% to $30.3 million.
Cash dividends paid in the first half of 2013 amounted to $343.4
Based on the strong demand expectation, management of Generac has
revised its guidance for the year 2013 upwards. Net sales growth
now is thereby expected to be in the low 20% range versus
low-to-mid teens growth expected earlier. Growth in the second
half of the year is anticipated to be roughly in the mid
Generac expects gross margin to be flat year over year while
operating expenses, as a percentage of sales, are anticipated to
be approximately flat versus the marginal increase expected
earlier. Adjusted EBITDA growth is expected to improve from
low-teens percentage range to a low 20% range.
Generac currently has a $2.8 billion market capitalization. The
stock carries a Zacks Rank #3 (Hold). Other stocks to watch out
for in the industry are
Lennox International, Inc.
), with a Zacks Rank #1 (Strong Buy) while
), each carrying a Zacks Rank #2 (Buy).