Generac Holdings Inc.
) posted strong results for the third quarter of 2013, surpassing
the year-ago earnings and revenues. The company grew organically
as well as through acquisitions. The robust results encouraged
Generac to increase its 2013 outlook. Driven by the upbeat
results, Generac shares spiraled up 13.4% to close at $47.44 on
Oct 24, 2013.
Adjusted earnings per share for third-quarter 2013 came in at
$1.06, exceeding the year-ago figure by 35.9%. Results also
surpassed the Zacks Consensus Estimate of 83 cents by 27.7%.
On a GAAP basis, Generac generated earnings per share of 67
cents, increasing 81.1% year over year.
Generac generated net sales of $363.3 million, up 20.9% year
over year led by increased demand from households for backup
power. Acquisitions of Ottomotores and Tower Light Srl aided the
rise in revenues.
Revenues from Residential products increased marginally year
over year to $192.7 million benefitting from rising demand for
home standby but was partially offset by fewer shipments of
portable generators. The Commercial & Industrial product
revenues recorded 61.8% year-over-year growth to $151.5 million,
attributed to acquisitions of Ottomotores and Tower Light Slr and
rise in sales of natural gas generators.
Cost of goods sold in the third quarter increased 21.1% year
over year and represented 61.6% of total revenue, marginally up
from 61.5% in the year-ago quarter. As a percentage of total
revenue, selling and service, research and development, and
general and administrative expenses together, stood at 12.4%
versus 14.7% in the year-ago quarter. Adjusted earnings before
interest, tax, depreciation and amortization (EBITDA) margin was
27.5%, registering an increase of 210 basis points (bps) year
Exiting the third quarter of 2013, Generac's cash and cash
equivalents stood at $116.5 million versus $126.6 million in the
preceding quarter. Long-term borrowings and capital lease
obligations were roughly flat at $1,177.7 million compared with
the previous quarter.
In the third quarter, Generac generated roughly $80.9 million
cash from operating activities up nearly 16.4% year over year.
Capital spending dropped 46.9% year over year to $4.2 million.
Accordingly, free cash flow of the company increased 24.5% to
Subsequent to the quarter end, the company entered into an
agreement with Baldor Electric Company to acquire the Baldor's
generator division. These assets will complement Generac's
existing line of business and enable deeper penetration into the
North American and international markets. The completion of the
transaction is anticipated in fourth-quarter 2013 and is expected
to be accretive to sales immediately.
Based on strong demand expectation, management of Generac has
revised its guidance for the year 2013 upwards. The company now
expects net sales growth in the low-to-mid 20% range, up from the
low 20% range expected earlier.
Generac expects gross margin to increase by roughly 50 bps
year over year in 2013, while operating expenses, as a percentage
of sales, are anticipated to decline by 75 to 100 bps compared to
flat expenses expected earlier. Adjusted EBITDA growth is
expected to improve from a low 20% range to a low 30% range.
Generac carries a Zacks Rank #3 (Hold). Other stocks worth
considering in the industry are
), each carrying a Zacks Rank #2 (Buy).
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