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Generac Holdings (GNRC) Beats Q4 Earnings on Solid Sales

Generac Holdings Inc.GNRC reported impressive fourth-quarter 2016 results. Its adjusted earnings came in at $1.12 per share, surpassing the Zacks Consensus Estimate of $1.03 by 8.7%. Also, the bottom line grew 15.5% from the year-ago tally of 97 cents.

For 2016, the company's adjusted earnings were $3.03 per share, surpassing the Zacks Consensus Estimate of $2.95 and the year-ago tally of $2.87.

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Revenues

In the quarter, Generac Holdings generated net sales of $417.4 million, up 16.7% year over year. However, the top line marginally surpassed the Zacks Consensus Estimate of $417.1 million.

On a segmental basis, the company's Domestic segment's sales grew 4% year over year to $339.7 million while that from International segment surged 149.2% to $77.7 million.

Based on product classes, the company's Residential product sales grew 20.3% year over year to $238.9 million; Commercial & Industrial product sales increased 12.3% to $148.1 million; and Other sales totaled $30.4 million, increasing 10.7% year over year.

For 2016, Generac Holdings' net sales were $1,444.5 million, up 9.7% year over year but in line with the Zacks Consensus Estimate.

Costs & Margins

In the quarter, Generac Holdings' costs of goods sold increased 16.1% year over year, representing 63.1% of total revenue versus 63.4% a year ago. Gross margin increased 30 basis points (bps) to 36.9%. Selling & service, research & development, and general & administrative expenses totaled $69.5 million and accounted for 16.6% of net sales.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $91.8 million, up from $80.1 million in the year-ago quarter. EBITDA margin decreased 40 bps to 22%.

Balance Sheet & Cash Flow

Exiting the fourth quarter, Generac Holdings had cash and cash equivalents of $67.3 million, up from $54.2 million in the previous quarter. Long-term borrowings decreased 0.7% sequentially to $1,006.8 million.

In the fourth quarter, the company generated net cash of $123.9 million from its operating activities, up 10.9% year over year. Capital spent on purchase of property and equipment totaled $9.6 million, down 8.8% year over year. Free cash flow improved 12.9% to $114.3 million.

During the year, the company distributed dividends amounting to $0.08 million, while repurchasing shares worth $149.9 million.

Outlook

For 2017, Generac Holdings anticipates sales to increase 5−7% year over year. Organic revenues are predicted to increase 1−3%. Adjusted EBITDA margin is predicted to be roughly 19−19.5%, while free cash flow conversion is expected to be over 90% of net income.

Generac Holdlings Inc. Price and Consensus

Generac Holdlings Inc. Price and Consensus | Generac Holdlings Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $5 billion, Generac Holdings currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Applied Optoelectronics, Inc. AAOI , Axcelis Technologies, Inc. ACLS and Babcock & Wilcox Enterprises, Inc. BW . While both Applied Optoelectronics and Axcelis Technologies sport a Zacks Rank #1 (Strong Buy), Babcock & Wilcox Enterprises carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Applied Optoelectronics, Inc.'s earnings estimates for 2017 improved over the last 60 days. Average earnings surprise for the last four quarters is a positive 106.74%.

Axcelis Technologies, Inc. has an average positive earnings surprise of 151.25% for the last four quarters. Also, its earnings estimates for 2017 and 2018 improved over the last 60 days.

Babcock & Wilcox Enterprises, Inc.'s earnings estimates for 2017 have been revised upward, over the last 60 days.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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