Despite initiating its full-year 2023 net sales guidance to be down 6-10% as compared to 2022, Town of Genesee-based Generac Holdings Inc. is expecting overall trends in the energy technology industry to be in the company’s favor.
Generac released its earnings for the fourth quarter of 2022 this week, which showed strong performance in the company’s Commercial and Industrial (C&I) product categories, but a weaker performance in residential product sales. The company said higher home standby field inventory levels continues to impact orders and shipments, and clean energy product shipments were lower than expected as Generac works on improving the reliability of those products.
The company does expect home standby growth to return to normal levels by Q3 and Q4 of 2023.
Overall, net sales saw a decrease of 2% year-over-year to $1.05 billion with residential product sales decreasing 19%. However, C&I product sales increased 27% year-over-year.
“While we are experiencing temporary headwinds for home standby generators and clean energy products, the underlying secular growth themes and mega-trends that support our ‘Powering a Smarter World’ enterprise strategy remain firmly intact,” said Aaron Jagdfeld, president and chief executive officer of Generac.
Jagdfeld provided further insight as to why the company is confident in its long-term growth trajectory. Overall, the company looks favorably at the future need for residential products due to increased instances of severe weather events and people seeing how unreliable the country’s electrical infrastructure is. Also, as more people are working from home than ever before, consumers are aware of the growing need for backup power solutions.
“The home as a sanctuary and aging in place trends that are helping drive demand for residential backup power solutions remain very compelling,” said Jagdfeld. “A structural shift in consumer preferences and work habits in the U.S. in recent years has further increased sensitivity to power outages with the percentage of individuals working from home tripling and home health referral volumes doubling since 2019.”
Jagdfeld also addressed how the how the closure of Mooresville, North Carolina-based Power Home Solar, which had been doing business as Pink Energy, continues to affect Generac. Shipments of Generac’s PWRcell energy storage systems have decreased due to Pink Energy filing for bankruptcy and the “overhang” of SnapRS quality-related concerns.
“We are committed to supporting the dealers that are participating in our SnapRS warranty coverage upgrade program as well as ensuring that end customer systems are performing as intended,” said Jagdfeld. “Channel partner response to these efforts has been favorable thus far, and we are working to build a larger and stronger network of installers and distributors, which remains a top priority for the company in 2023 as we position our residential clean energy product offering for long term success.”
The company expects net income margin, before deducting for non-controlling interests, to be approximately 7.5 to 8.5% for the full-year 2023.