This will be a Top Trade Alert (GNRC):
🚢 Generac is in a classic transition: a cyclical, outage‑sensitive residential generator business that just had a rough year, pivoting hard into structurally growing C&I and data‑center power where the backlog and margins look much better. The last quarter hurt because of weaker outages, tariffs, and mix, but the balance sheet is solid, guidance reset has already happened, and analyst targets in the high‑100s/low‑200s are consistent with a reasonable 2028 valuation case.[finance.yahoo]​
What went wrong in the last year
Q3 2025 miss and guide‑down:
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- Q3 EPS came in at $1.83 vs $2.25 a year earlier and below consensus by almost 19%; revenue was $1.11B vs $1.17B YoY and about 7–8% below estimates.[marketwatch]​
- Management cut 2025 guidance from +2–5% sales growth to flat revenue, and trimmed net income margin from 7.5–8.5% to ~6% and adjusted EBITDA margin from 18–19% to ~17%.[seekingalpha]​
Drivers of the weakness:
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- Residential product sales were down about 13% YoY, driven largely by an unusually light outage environment and some digestion after past boom periods.[finance.yahoo]​
- Gross profit fell from $472M to $427M, and margin compressed due to unfavorable sales mix, increased tariffs, and weaker manufacturing absorption, partially offset by higher pricing.[finance.yahoo]​
- Operating expenses rose ~7% on legal and regulatory costs, so operating income dropped ~39% and adjusted EBITDA fell from $232M to $193M.[marketwatch]​
So the “miss” was: fewer outages → weaker high‑margin residential volume, plus tariff drag and higher fixed costs, all against guidance that had assumed a better environment.
Tariffs, supply chain, and Trump 2.0
Tariffs:
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- In April 2025 GNRC cut its full‑year forecast citing “elevated tariff rates, unpredictable government policy developments, and a potentially weaker global economy,” and lowered expected net margin by roughly 2 points.[
