Generac Holdings Inc. has cut its full year guidance for 2022 by roughly $560 million as its production of home standby generators has outpaced installation capacity.
The Town of Genesee-based company is still forecasting a 23% increase in sales for the year at the midpoint of its guidance, but that is down sharply from its prior guidance, which called for a 38% increase at the midpoint. The change drops the company’s forecasted net sales for the year from $5.16 billion to around $4.6 billion.
Generac released preliminary results for the third quarter on Wednesday, reporting a 15% increase in net sales. In the first half of the year, the company’s sales were up more than 40%.
The company has seen a strong increase in demand for its home standby generators in recent years as more people have spent time working from home and natural disasters have driven increased interest in standby generators.
Generac is the second southeastern Wisconsin manufacturer to release preliminary results for the quarter. Milwaukee-based A.O. Smith also
cut its guidance on account of weaker demand for North American water heaters. The company said its wholesale distributors were reducing inventory as lead times returned to pre-pandemic levels.
Aaron Jagdfeld, chairman, president and chief executive officer of Generac, said the company’s commercial and industrial business performed as expected during the third quarter but its residential product sales were under pressure.
“As discussed on our second quarter earnings call, installation capacity for home standby generators continued to grow but still lagged our production output during the third quarter,” Jagdfeld said. “This has resulted in higher field inventory levels and lower home standby generator orders from our channel partners than previously expected even as end customer demand continues to be strong driven by elevated power outages, most notably from Hurricane Ian.”
Generac’s third quarter performance and its new guidance suggests the company’s fourth quarter sales would be up around 1%.
The company said it saw dealer count, in-home consultations, close rates, activations and dealer project lead times improve during the third quarter, but it expects these issues to continue through the first half of 2023 as its distribution partners work down elevated backlog and inventories.
Jagdfeld also noted Generac’s clean energy business was “negatively impacted by a large customer which ceased operations and has since filed for bankruptcy protection.” Generac is
listed as a disputed creditor in a bankruptcy filing by North Carolina-based Power Home Solar LLC, which does business as Pink Energy. Court documents list around $17.7 million in disputed debts that Pink Energy could owe Generac.
Prior to the bankruptcy filing, Pink Energy had sued Generac over issues components Generac supplied to Pink Energy.
