Generac posts record quarter, but supply constraints send stock tumbling

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A worker inspects a 24-kilowatt Generac home generator at Captain Electric on February 18, 2021 in Orem, Utah.

George Frey | Getty Images

Shares of backup power company Generac fell more than 12% on Wednesday at the lows after the company warned about ongoing supply chain constraints and inflationary pressures.

The stock’s double-digit percentage drop made it the worst-performing S&P component, despite the company beating top- and bottom-line estimates during the second quarter.

Generac earned $2.39 per share on an adjusted basis, which was ahead of the $2.31 analysts were expecting, according to estimates compiled by StreetAccount. The company saw record sales of $920 million, which also topped the expected $867.2 million.

Around 11:30 a.m. on Wall Street the stock had recovered some of its losses, and last traded down 7%.

“We’re particularly proud of achieving this tremendous top-line growth along with the record levels of adjusted earnings, despite the ongoing significant cost pressures, logistic challenges, and various capacity constraints we faced in the quarter across the supply chain,” the company said on its earnings call.

Generac’s gross profit margin declined year over year from 38.2% to 36.9% thanks to higher input costs including around raw materials, labor and logistics.

Still, Generac said demand for its generators remains “incredibly robust” amid “significantly higher power outage activity over the past several quarters” including in Texas and California. The company also said it saw “tremendous growth” for its energy storage systems as consumers turn to clean energy and the growing solar plus storage market.

Even with Wednesday’s decline shares are up nearly 80% for 2021, making the stock the fifth best-performer in the S&P 500.

Generac is far from the only company experiencing supply chain problems. Shares of Enphase Energy also dipped at the opening Wednesday after the company said it, too, cannot keep up with demand.

“Demand for our microinverter systems remained well ahead of supply in the second quarter of 2021, as component availability continued to be constrained,” the company said Tuesday in a statement.

Enphase said it expects the issues to persist during the third quarter, but is optimistic that the picture will be significantly better by the fourth quarter.

The stock slid as much as 5.5% before recovering those losses and trading in the green.

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