Generac Holdings Inc. (NYSE:GNRC) reached a 52-week high this past summer of $156.95 per share. Shareholders who took advantage of the run-up and exited their positions likely enjoyed some well-deserved profits. But for those who decided to hold or worse yet invest more, things did not turn out as planned. The music came to an abrupt halt when Generac announced its fiscal earnings for the second quarter of 2023 and lowered its outlook for the remainder of the year. In the span of just two trading sessions, Generac’s stock plummeted by more than 25%. The stock has yet to recover and shows no signs of doing so anytime soon. A class action lawsuit was recently filed seeking to recover losses incurred by public shareholders.
Generac started its climb towards the 52-week high in May 2023. Despite announcing year-over-year declines in the first quarter, management maintained its full-year 2023 net sales guidance based on what it claimed was “ongoing strength in leading indicators of demand” and reassured analysts and investors that it was sufficiently insulated from negative macroeconomic headwinds.
Investors began purchasing Generac shares and, before long, the stock hit its 52-week high in August 2023. Interestingly, Generac’s peers did not share the same success. The following chart illustrates Generac’s journey between May and August 2023 relative to several of its best-known competitors:
Generac clearly breaks from the pack in May while, for example, Honeywell and Emerson stayed relatively flat. This suggests that investors favored Generac over its competitors, presumably due to management’s bullish statements during the first quarter earnings conference call. The steep decline in August appears related to Generac’s decision to lower guidance as well as management’s explanation for the decision. Just months earlier, management had boasted confidence in its decision to maintain its outlook for the year, dispelling the notion that it was vulnerable to macroeconomic trends. Then, without any warning, management reversed course the very next quarter and brought guidance down because of a “weaker consumer spending environment for home improvement.”
The sudden change in narrative has resulted in additional litigation exposure for the company. A class action lawsuit was recently filed on behalf of investors who purchased Generac stock following management’s statements during the first quarter conference call. If successful, the litigation could recover stock losses suffered by those investors who neglected to exit their positions before the sell-off in August.
Generac shareholders that suffered losses are encouraged to learn more about how the class action lawsuit may benefit them and whether to seek to become a lead plaintiff representing the class of Generac shareholders.
