Heading into the eye of hurricane season for the Atlantic basin, demand for generators has Generac on the rise with earnings due. GNRC stock has now climbed to the top of its buy zone, earning a spot on IBD Leaderboard.
Through its subsidiary Generac Grid Services, the company announced last month its support of a new project aimed at better understanding the influence charging electric vehicles has on the power grid.
Generac's Concerto platform now supports AlectraDrive @Home, a managed EV charging initiative operated by Alectra Utilities. The AlectraDrive @Home pilot project assesses the impact on the grid by managing the delivery of EV charging to residents in single-family homes and multifamily buildings.
Enrolled single-family homes allow the utility to reduce power to their EV charging during peak demand events. For multifamily buildings enrolled in the pilot, EV charging stations are programmed to avoid charging above a maximum power threshold during peak periods of the day.
Controlling these thresholds has the potential to save building owners significant amounts on their electricity bills, while maintaining electrical capacity for other uses.
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Generac Generates Rebounding Estimates
Founded in 1959 and the first company to engineer affordable home standby generators, Generac is now the top manufacturer of home backup generators.
While the charging of EVs adds stress on the country's electrical grid, the annual threat of hurricanes also looms. According to the National Oceanic and Atmospheric Administration (NOAA), the official hurricane season for the Atlantic basin is from June 1 to Nov. 30. But most hurricane activity occurs between mid-August and mid-October.
Hurricane-induced power outages, as well as heat waves in California and elsewhere, drive demand for generators from Generac and its peers.
GNRC stock made a sharp rise from 2016 into November of 2021 as the Wisconsin-based company posted solid earnings and sales growth. But that performance ran out of juice in recent quarters, with Generac showing declining earnings growth in its last three reports. It posted earnings per share of 63 cents in Q1, a 68% year-over-year decline. Analysts expect a 61% EPS decline when Generac reports before the market opens on Aug. 2, with estimates of a 27% decline for the year.
But Wall Street forecasts a rebound to 33% earnings growth in 2024.
After posting five consecutive quarters of more than $1 billion in revenue, sales growth has also slowed. Generac slipped below the $1 billion mark in Q1, generating $887.9 million in revenue.
While GNRC stock has already launched a rebound and breakout, the period of struggling fundamentals has pulled down its Composite Rating to a 77. But the Electrical-Power/Equipment group ranks a strong No. 17 out of the 197 industries IBD tracks.
Generac peers Allied Motion Technologies, Powell Industries and Vertiv all sport the highest-possible 99 Composite Rating. All three companies have estimates calling for at least double-digit earnings growth this year and next.
GNRC Stock Sparks Move To Top Of Buy Zone
Last month, Generac shot past a 141.54 buy point in a cup pattern in heavy volume. The relative strength line jumped higher on that move. GNRC stock remains in the buy zone, with the RS line starting to rise again after a post-breakout dip. The buy range extends to 148.62.
Exposure in IBD Leaderboard was raised after a successful test of the 21-day exponential moving average. Also note how the stock rebounded well after pulling back sharply recently.
The Aug. 2 earnings report presents the next big test for Generac. See if the numbers continue to boost GNRC stock to new heights.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
