Generac posts record quarter, but supply constraints send stock tumbling

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

George Frey | Getty Images

Shares in emergency power company Generac fell to lows of more than 12% on Wednesday after the company warned of ongoing supply chain restrictions and inflationary pressures.

The double-digit percentage decline in the stock made it the worst S&P component, despite the company beating sales and earnings estimates in the second quarter.

Generac made $ 2.39 per share on an adjusted basis, which StreetAccount estimates was above the $ 2.31 analysts were expecting. The company achieved record sales of $ 920 million, which also surpassed the expected $ 867.2 million.

By 11:30 a.m. on Wall Street, the stock had made up some of its losses and was last trading at 7%.

“We are particularly proud to have achieved this tremendous revenue growth along with record levels of adjusted earnings, despite the continued significant cost pressures, logistical challenges and various capacity constraints we faced across the supply chain during the quarter,” the company said on his conference call.

Generac’s gross profit margin decreased from 38.2% year-over-year to 36.9% due to higher production costs including raw materials, labor and logistics.

Still, Generac said demand for its generators remains “incredibly robust” given the “significantly increased blackout activity in recent quarters,” including in Texas and California. The company also said it has seen “tremendous growth” in its energy storage systems as consumers turn to clean energy and the growing market for solar plus storage.

Despite Wednesday’s decline, stocks are up nearly 80% for 2021, making the stock the fifth-best-performing in the S&P 500.

Generac is far from the only company with supply chain problems. Enphase Energy’s shares also fell on Wednesday’s open after the company said it was also unable to keep up with demand.

“The demand for our microinverter systems in the second quarter of 2021 was well above supply, as the availability of components was still limited,” the company said in a statement on Tuesday.

Enphase expects the problems to persist in the third quarter, but is optimistic that the picture will improve significantly in the fourth quarter.

The stock lost as much as 5.5% before catching up on those losses and trading in the green.

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