Three analysts have raised their EPS estimates for our first pick today, and secondly, we are taking some profits.
Generac Holdings Inc. (GNRC)
From Dow Theory Forecasts
A leading maker of portable electric generators, Generac Holdings Inc. (GNRC) is benefiting from its growing distributor base and a higher number of power outages in the past couple
years. Per-share profits jumped 40% in 2018 on 20% higher sales. Generac attributed the fatter operating profit margins to a favorable shift in product mix toward more profitable home standby generators. About 78% of Generac’s revenue came from the U.S. last year.
Management sees sales climbing 10% to 12% in the first half of 2019 and 3% to 7% for the year. Consensus estimates call for revenue growth of 10% in the March quarter, 5% in the June quarter, and 2% for all of 2019, leaving plenty of room for upside. The low end of management’s 2019 sales guidance implies no major power outages.
Shares trade at 12 times estimated 2019 profits, versus an average of 15 for electrical-equipment stocks in the S&P 1500 Index. The company has a market value of $3.3 billion.
Richard Moroney, CFA, Dow Theory Forecasts, www.dowtheory.com, 800-233-5922, February 25, 2019