NEW YORK (AP) — Homeowners have been snapping up home power generators after Superstorm Sandy, and shareholders have been snapping up shares of generator-maker Generac Holdings Inc. They're up 71 percent in the past 6 months, with much of the gain beginning in late October when Sandy hit.
The shares have been volatile recently, spending a few weeks above $39 and then dipping on Thursday after it reported fourth-quarter results, before rising on Friday.
THE SPARK: Generac reported better-than-expected results on Thursday, but its shares still fell. Some investors are starting to wonder how long the Sandy boom in generator sales will run.
THE BIG PICTURE: Generac expects 2013 revenue to grow 10 percent, mostly from its acquisition of Latin American generator maker Ottomotres, announced in November. Revenue growth in its core business will be more like 1 to 2 percent, according to KeyBanc analyst Jeffrey D. Hammond.
THE ANALYSIS: Hammond wrote that Generac management's expectations should prove conservative. He believes residential sales will increase. He said weaknesses in the stock should be seen as a buying opportunity.
However, Goldman Sachs analyst Jerry Revich downgraded Generac to "Sell" on Friday, saying that generator sales are likely to peak in the first half of this year, and too much growth is assumed by Generac's current stock price. Generator sales typically peak within nine months of a big storm like Sandy, he wrote. And the storm's path was focused on Generac's core sales area — where it has 2,200 of its 4,500 national dealers. That is going to make it tough to repeat the sales boost it is getting from Sandy.
"While weather is clearly unpredictable, to avoid an organic growth downturn would require another storm to disrupt power for over a week at a part of the country that holds half of Generac's distribution," he wrote.
SHARE ACTION: Up $1.32, or 3.7 percent, to $36.98 in afternoon trading.