During this week’s earnings call,
Generac's CEO discussed how trends like the booming data center market, tariffs and political uncertainty are impacting the business.
The Town of Genesee-based manufacturer of energy technology solutions and power products reported a net sales increase of 16% to $1.23 billion, and a net income increase of 21.4% to $117.2 million, in the fourth quarter of 2024.
For the full year, Generac reported a sales increase of 7% to $4.3 billion, and a 47.4% increase in net income to $316.3 million.
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Aaron Jagdfeld[/caption]
Like several other local manufacturers, Generac is hoping to cash in on the booming data center construction market in the coming years.
Generac recently introduced a larger diesel generator product line, which was specifically designed for large load, mission critical back up power applications, including data centers. The company believes the megatrend of increasing adoption of artificial intelligence, thus leading to the construction of more data centers, presents a “significant” long term opportunity.
Generac plans to target both data center hyperscalers and edge data centers with its new product lineup. Increased power demand across the globe will also have a positive impact on Generac’s older product lines.
“Some of the current data points that are available, if you look at the current lead times for some for these (data center) products from existing suppliers, they are very long,” said
Aaron Jagdfeld, president and CEO of Generac. “The entire supply chain is very tight right now due to increasing demand. We believe there’s ample room for us to participate.”
Jagdfeld said Wednesday that President Donald Trump’s tariffs on imports from Canada and Mexico (25% tariffs that Trump early this month paused for 30 days) are not expected to have a noteworthy impact on the business. Generac already has a “robust” domestic supply chain, something Jagdfeld attributes to the struggles experienced during the COVID-19 pandemic.
"I think one of the benefits of having to crawl through the broken glass that we all crawled through back in COVID, in terms of supply chain disruptions and needing to deal with that, is that we got a lot smarter about not being sole source on a lot of components," said Jagdfeld.
Moving forward, Generac will work with its Chinese suppliers to try to pass the cost of the tariffs on to them. In the long run, some price increases for Generac products will be inevitable.
"That's what leadership in this country has been telling us. It's not us who pays for (the tariffs), it's the other countries. So, let's make sure that happens," he said. "It's not realistic to assume that all suppliers are willing to absorb the added cost of tariffs, so we've got to continue to evaluate that."
Another uncertainty Generac is currently facing is figuring out if its federal contracts, including some from the Department of Energy, will remain viable.
Last July, Generac was awarded
a $200 million grant from the U.S. Department of Energy which will allow the company to install solar and battery storage systems for disadvantaged households in Puerto Rico. The manufacturer has also received federal grants to complete work in
California and
Massachusetts.
"We've not received notice that that program has been canceled formally," said Jagdfeld. "I think it's important to note that it's not tied directly to IRA (Inflation Reduction Act) funding. I would also note that one of our major competitors in residential batteries, Tesla, is the largest residential battery provider in the DOE (Department of Energy) program for Puerto Rico."
Generac initiated guidance for 2025 that anticipates continued net sales growth. This is expected to be driven primarily by residential product sales growth, primarily led by shipments of home standby generators and residential energy technology solutions. Full-year net sales are expected to increase between 3% to 7% compared to 2024.
Shares of Generac stock rose 9% today through early afternoon, gaining $12.70 per share to $154.44 a share.
