Generac (GNRC) is a Zacks #1 Rank (Strong Buy) due to its solid history of positive earnings surprises. Its recent pull back makes it attractive to aggressive growth investors.
Company Description
Generac is a manufacturer of backup power generation products serving residential, light commercial and industrial markets. The Company designs, engineers, manufactures, and markets a range of automatic, stationary standby and portable generators. Generac’s power systems range in output from 800 watts to 9 megawatts and are available through a broad network of independent and industrial dealers, retailers and wholesalers.
Strong Earnings Surprise
GNRC recently had a very strong quarter. The company reported earnings of $0.76 per share, more than $0.15 or 24% ahead of the Zacks Consensus Estimate. Revenue for the quarter was $267 million, 19% ahead of expectations and up from $161 million in the year ago period.
This comes on the heels of the September quarter where the company reported earnings of $0.75 per share, about 19% or $0.12 better than the Zacks Consensus Estimates. Revenue had a similar surprise, coming in 12% ahead of expectations and 48% ahead of the year ago level.
Six Beats and One Miss
Generac has posted six beats and one miss in its last seven earnings reports. The lone miss was in the March 2011 quarter and the stock moved lower by 2.5% as a result. The six other quarter have seen beats on the bottom line as small as 13% and as large as 87%.
The most recent beat of 24% resulted in the stock moving lower by 14%, a move that some point to being caused by a typo in a sell side analysts report.
GNRC trades in line or at a discount to the industry average on most metrics. A slight discount is found in both the trailing and forward PE, with a very palatable 9.9x multiple for GNRC being bested by the 10.7x industry average. Price to book also shows GNRC trading slightly below the industry average. The only metric that show GNRC at a premium is price to sales.
The Chart
A quick look at the chart shows the significant sell off following the most recent earnings report. After a small bounce, the stock has once again faded lower. This sets up nicely for aggressive growth stock investors as the company has a solid history of large earnings surprises, sold off recently and has a low valuation. GNRC is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
