(By Mani) Generac Holdings, Inc
) is expected to benefit from its new found awareness due to the recent power outages spanning from northern Illinois into Delaware, Maryland, and Virginia left 3-4 million people without power, some for up to 10 days.
Generac is a market-leading designer and manufacturer of standby generators for the residential, industrial, and commercial markets. The long power outages created a new awareness among the people to buy a generator for backup power.
While the exact nature of demand stimulation from the new awareness event will be known in hindsight, the company's estimated roughly 70 percent share in residential standby positions the company well for what looks like another potential material awareness event.
Generac's residential business actually grew in 2008 and 2009, even excluding the notable benefit from re-entering the portable generator market.
"We believe this underscores the theme of growth into an underpenetrated market and further validates higher baseline expectations ensuing from awareness events," Oppenheimer analyst Christopher Glynn wrote in a note to clients.
The initial demand onslaught from mass-scale outages benefits portable sales, and with hurricanes, forecasting allows distributors to stock ahead. As a result, any immediate impact on demand from the unforeseen June 29 "Super Derecho" weather event could play differently from 2011's events. However, the intense heat will impress consumers as to the benefits of standby generation.
"We believe GNRC's recent re-entry into the power washer segment represents a material revenue opportunity," the analyst added.
Generac was the market share leader in the power washer market when the business was sold in 1998. The company similarly re-entered portable generators in 2008 when the non-competes expired, and believes it has reestablished market share leadership there.
"While intrigued by the opportunity from recent outages, we defer on estimate revisions pending updated guidance. However, should this prove a new material demand driver, we note GNRC's solid execution and capacity flexibility, having delivered over 100% organic growth in 1Q12 successfully," Glynn noted.
For the first quarter, the company earned $30 million, or 44 cents a share, compared to $5 million, or 7 cents a share, a year-ago. Excluding items, it reported earnings of 96 cents a share, handily beating consensus view by 25 cents. Quarterly revenue more than doubled to $295 million.
The company's earnings are expected to grow 37 percent to 56 cents a share for the second quarter and 9 percent to $2.36 a share for the full year Similarly, sales are projected to increase 42 percent to $229.01 million for the second quarter and 22 percent to $967.22 million for 2012.