Analysts Just Shaved Their Generac Holdings Inc. (NYSE:GNRC) Forecasts Dramatically

Market forces rained on the parade of Generac Holdings Inc. (NYSE:GNRC) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the 22 analysts covering Generac Holdings are now predicting revenues of US$4.6b in 2022. If met, this would reflect a credible 3.4% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to fall 18% to US$6.44 in the same period. Previously, the analysts had been modelling revenues of US$5.2b and earnings per share (EPS) of US$10.22 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

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It'll come as no surprise then, to learn that the analysts have cut their price target 27% to US$237. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Generac Holdings, with the most bullish analyst valuing it at US$450 and the most bearish at US$190 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Generac Holdings' revenue growth is expected to slow, with the forecast 6.8% annualised growth rate until the end of 2022 being well below the historical 20% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Generac Holdings.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Generac Holdings going out to 2024, and you can see them free on our platform here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.