GNRC Q1 Earnings Call: Home Standby Demand and Tariff Mitigation Shape Outlook

May 13, 2025 at 09:19 AM EDT

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Power generation products company Generac (NYSE: GNRC) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 5.9% year on year to $942.1 million. Its non-GAAP profit of $1.26 per share was 30.5% above analysts’ consensus estimates.

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Generac (GNRC) Q1 CY2025 Highlights:

Revenue: $942.1 million vs analyst estimates of $921.1 million (5.9% year-on-year growth, 2.3% beat)
Adjusted EPS: $1.26 vs analyst estimates of $0.97 (30.5% beat)
Adjusted EBITDA: $149.5 million vs analyst estimates of $129.2 million (15.9% margin, 15.8% beat)
Operating Margin: 8.9%, up from 7.5% in the same quarter last year
Free Cash Flow Margin: 2.9%, down from 9.6% in the same quarter last year
Market Capitalization: $7.52 billion

StockStory’s Take

Generac’s first quarter results were largely driven by elevated shipments of home standby generators, with management attributing this to ongoing power outages—particularly from wildfires in California—and increased consumer interest. CEO Aaron Jagdfeld noted that residential product sales, including the ecobee smart thermostat line and energy storage systems, outperformed internal expectations. The company highlighted both supply chain optimization and favorable sales mix as key contributors to improved gross margins.

Looking ahead, Generac’s forward guidance reflects heightened uncertainty from evolving tariff policies and potential shifts in consumer spending. Management emphasized that current price increases and ongoing cost reduction initiatives are intended to fully offset the anticipated impact of tariffs. Jagdfeld explained, “Our updated outlook assumes that current tariff levels hold for the remainder of the year,” and noted that a more cautious economic environment is likely, but the company does not foresee a full recession in 2025.

Key Insights from Management’s Remarks

Generac’s management identified home standby generator demand and residential energy technology momentum as primary drivers of first quarter performance. The company also highlighted the impact of tariffs, proactive pricing actions, and new product launches as shaping both current results and future expectations.

Home Standby Generators Surge: Shipments rose at a mid-teens rate year-over-year, fueled by increased power outages, especially in underpenetrated markets like California. However, close rates remained pressured due to demand exceeding sales and installation capacity.
Residential Energy Technology Growth: Ecobee’s smart thermostats and energy storage systems saw strong sales, with ecobee connected homes rising 17% year-over-year. Management believes the new entry-level thermostat will help capture value-seeking customers.
Tariffs and Pricing Actions: Management described the current 145% China tariff and other trade measures as creating a $125 million cost headwind in the second half. To mitigate this, Generac implemented broad price increases of 7%–8% across products, aiming to offset the impact dollar-for-dollar at the EBITDA margin level.
Supply Chain Diversification: Less than 10% of materials are now sourced from China, down from prior years, and new product lines are expected to further reduce this exposure. The company is leveraging its international manufacturing footprint and automation investments to enhance flexibility and resilience.
C&I Product Dynamics: Commercial and industrial product sales declined due to softness in rental and non-standby applications, partially offset by gains in telecom and industrial distribution. The upcoming launch of large megawatt diesel generators is expected to address new market segments, including data centers.

Drivers of Future Performance

Management’s full-year outlook is shaped by the interplay between tariff-driven cost pressures, pricing actions, and evolving consumer demand, with an emphasis on maintaining margins and supporting product launches.

Tariff Uncertainty and Mitigation: The company’s guidance assumes tariffs remain at current levels, with any changes posing both risk and opportunity. Generac expects price increases and cost reduction programs to fully offset tariff-related expenses at the EBITDA margin.
Residential Demand and Outage Activity: Management is watching for continued elevated power outages and associated generator demand, especially in less mature regions like California. Should outage activity return to baseline, shipment volumes could decline.
New Product Launches and Channel Expansion: The second half of the year will see the launch of next-generation home standby generators and energy storage systems, expected to broaden appeal and improve installation efficiency. Growth in the residential dealer network and enhanced marketing are seen as supporting long-term sales and close rates.

Catalysts in Upcoming Quarters

In the next few quarters, the StockStory team will be monitoring (1) the impact of new home standby generator and energy storage product launches on sales and installation efficiency, (2) the effectiveness of tariff mitigation measures, including further supply chain diversification and pricing strategies, and (3) trends in power outage activity—especially in emerging markets like California. The progression of government policies on tariffs and energy incentives will also be critical in shaping demand and profitability.

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