Gnrc Drops 15.3% In The Past Month. Is The Selloff A Buying Chance?

Generac Holdings Inc. GNRC has fallen 15.3% over the month even as several operating measures improved. The pullback leaves investors weighing whether stronger earnings and expanding data center demand can support a rebound.

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The counterpoint is execution. Revenue missed expectations in the third quarter, margins face mix pressure and the company is scaling manufacturing capacity quickly.

GNRC’s Pullback Meets a Stronger Growth Backdrop

Generac reported third-quarter 2026 net sales of $1.29 billion, up 16% year over year. Adjusted earnings rose 38.8% to $2.54 per share and beat the Zacks Consensus Estimate by 6.7%.

Sales, however, missed the consensus mark by 1.5%. That gap helps explain why improving earnings do not remove all investor caution, particularly with the business mix changing rapidly.

Generac’s Data Center Backlog Reshapes the Story

Data centers have become a major growth driver. Generac generated more than $100 million of data center revenues in both the second and third quarters, while backlog reached about $4.5 billion in the third quarter.

Management now expects nearly $500 million of data center revenues in 2026 and more than $2 billion in 2027. Cummins Inc. CMI is also expanding its data center power exposure through generator and energy-storage projects, underscoring the scale of industry demand.

GNRC’s Residential Recovery Adds a Second Engine

Residential revenues rose 9% year over year to $744 million in the third quarter. Home standby generator shipments increased at a mid-teens rate as outage activity returned to more normal levels.

Generac’s residential dealer network expanded to nearly 9,900, while in-home consultations increased sharply. Those indicators provide a second growth avenue beyond data centers, although residential demand remains sensitive to weather and outage activity.

Generac’s Margin and Execution Risks Could Persist

Third-quarter gross margin improved to 39.9%, but management expects fourth-quarter gross margin of 37-38%. A larger contribution from lower-margin data center sales and other inflationary pressures are expected to drive the sequential decline.

Tight high-horsepower diesel engine availability, capacity-ramp risk and capital spending of roughly 4-4.5% of 2026 revenues add execution pressure. Eaton Corporation plc ETN is also expanding manufacturing tied to data center infrastructure, highlighting how suppliers across the market are investing to meet rising demand.

GNRC’s Momentum Signals Support a Tactical Rebound

The pullback sits alongside accelerating earnings and backlog, but it is not a simple value call. Shares were still up 23.1% over the past year despite the recent decline. Manufacturing execution and mix-driven margin pressure could remain important swing factors.

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GNRC currently carries a Zacks Rank #2 (Buy), along with a Momentum Score of A, Growth Score of B and VGM Score of B. Those readings favor the stock’s near-term setup when paired with a top Zacks Rank.

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The Value Score of C is less emphatic. GNRC trades below some historical and industry earnings multiples, but other valuation measures are not uniformly inexpensive. The combination supports selective optimism rather than treating the 15.3% decline as an automatic bargain.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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