Generac Generator Inventory Sees Strongest Week Since November Due to Heat Wave and Impending Storms
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A worker inspects a 24-kilowatt Generac home generator at Captain Electric in Orem, Utah, on Feb. 18, 2021. George Frey | Getty Images News | Getty Images
With hurricane season in full swing and an oppressive heat wave affecting various regions of the nation, investors have been buying shares of Generac. The backup generator manufacturer is experiencing its sixth consecutive day of gains and the best week since November 2024, with an increase of nearly 12% this week.
High temperatures have impacted areas in the central and eastern U.S. since last weekend, leading to reported power outages in states such as New York, New Jersey, and Illinois. Extreme heat warnings and advisories remain active for parts of the Mid-Atlantic, Ohio Valley, and Southeast, affecting approximately 130 million people, according to the National Weather Service.
Additionally, this Atlantic hurricane season is anticipated to be above normal, as noted by the National Oceanic and Atmospheric Administration. The agency projects between 13 and 19 named storms, with six to 10 expected to develop into hurricanes. Among these, three to five could be classified as “major hurricanes,” which include categories 3, 4, or 5.
This week, tropical storm Andrea initially marked the start of the season but quickly diminished to a tropical rainstorm as wind speeds decreased, according to weather reports.
The combination of extreme heat and storms is exerting pressure on the U.S. power grid, which is already strained and aging. Research from the Pacific Northwest National Laboratory and the Electric Power Research Institute indicates that the risk of power outages from hurricanes could increase by 50% or more in some regions due to climate change, which may alter future storm behaviors.
Generac CEO Aaron Jagdfeld discussed these concerns in October, stating that severe weather coupled with the rise of new data centers is exacerbating the situation. “This has become a massively critical discussion point,” he emphasized, adding that the issue is likely to worsen.
Bank of America is forecasting an electrical load growth of 2.5% on a compound annual growth rate from 2024 to 2035.
Other companies to monitor include Trane Technologies, which manufactures cooling systems for homes and businesses, including data centers. The stock currently holds an average rating of hold from analysts, according to FactSet.
Utility companies are also expected to benefit from the rising power demand. Bank of America anticipates “significant” tailwinds in the power sector in the latter half of the year, with deals involving data centers expected to enhance margins for companies such as Constellation Energy and Vistra.
Despite the utilities sector outperforming the S&P 500 this year, Bank of America is taking a selective approach. Analyst Ross Fowler noted, “Given that sector outperformance, we would prefer laggards that have catalysts to drive enhancements in the second half.” His recommended opportunities include Sempra, NorthWestern Energy, and Alliant Energy.
— Reporting contributed by Hotnchill.
