2 Seasonal Stocks to Warm Up Your Portfolio
With winter soon approaching comes the potential for more inclement weather. Storms and blistery temperatures will drive the demand for companies that can accommodate the essential needs stemming from power outages and inclement weather. Unlike recent mild winters, the winter of 2023 to 2024 is expected to be more frigid, frosty and slushy, according to the Farmer's Almanac.
Snowfall is expected to be above normal and colder than normal temperatures. Energy reliance for power and heating will be heavy this season. Here are two stocks that directly benefit from these forecasted seasonal winter conditions this year.
Generac is the global leader in backup power generators for power outages and emergencies. It plays a pivotal role in pacifying homeowner’s angst with energy security. Whether a power outage is weather, or grid-related, the result is still the same: no electricity. Generac also makes generators for industrial and commercial uses.
Its Industrial Power division makes generators for data centers, which can be powered by various fuels ranging from diesel, propane and natural gas. Its power systems can be equipped with automatic transfer switches, which automatically switch power to generators when power outages occur. Its generators can also supplement additional power or redundancy needs with paralleling.
Energy Independence Tailwinds
Generac has touted the growing need for backup power generators as the outdated U.S. power grid is overloaded with the growing electricity demand. The insatiable demand is partially driven by migration from fossil fuels towards sustainable energy sources. During winter storms, mission-critical buildings like hospitals, data centers, broadband providers and numerous other segments rely on reliable performance and support from their generators.
Generac also offers other power generation services and products like solar energy systems, battery energy storage systems, microgrid solutions, generator monitoring and control systems and repair services.
Calm Before the Storm
Generac reported its Q2 2023 earnings of $1.08 per share, missing estimates by 8 cents. Revenues fell 22.5% YoY to $1 billion, still beating the $979.51 million consensus analyst estimates. Generac lowered its full-year 2023 guidance, with revenues falling 10% to 12% to $4.017 to $4.108 billion versus $4.12 analyst estimates.
Net income margin is expected to fall to 6-7% from previous guidance of 7.5 to 8.5%. EBITDA margin is lowered to 15.5 to 16.5%, down from the previously forecasted range of 17 to 18%. The bar has been set low heading into the winter.
Weekly Inverse Cup and Handle with a Bear Flag
The weekly candlestick charts illustrate the inverse cup and handle pattern with a bear flag. The inverse cup lip line formed in April 2020 at $90.30 as shares rose to $524.31 in Nov. 2021, forming a rounding top. Shares fell to retest the cup lip line at $90.30 in December 2022, completing the cup. The handle formed after the weekly market structure low (MSL) triggered above $102.3 as shares bounced to $156.48 by July 2023.
GNRC proceeded to make parallel higher highs and higher lows but has now fallen toward the weekly MSL trigger with a potential bear flag breakdown if it breaks $102.38. For now, the weekly relative strength index (RSI) is attempting to stay above the 40-band. The inverse cup and handle would trigger a breakdown through the $90.30 lip line. Pullback supports sit at $90.30 lip line, $75.50, $69.02 and $60.69.
Columbia Sportswear specializes in rugged outdoor lifestyle apparel catering to campers, skiers, climbers and mountaineers. The company provides outerwear, footwear, apparel, accessories and equipment tailored to outdoor and winter activities. It's apparel is well suited for frigid, frosty, slushy and colder-than-normal weather, which is expected this year.
The company will continue heavily promoting its Omni-Heat Infinity heat reflective technology designed to boost heat without degrading breathability. Omni-Heat Infinity technology features a gold-lined dot pattern that reflects body heat to the user, resulting in warmth and breathability in the coldest conditions. It's been interwoven into jackets, vests, base layers and boots. It's lightweight, breathable and keeps you warmer for longer.
Calming Before the Storm
Columbia reported Q2 2023 EPS of 14 cents, beating consensus analyst estimates for 1 cent, by 13 cents. Revenues rose 7.4% YoY to $620.9 million, beating consensus estimates of $586.45 million. The company ended the quarter with $302.8 million in cash and cash equivalents.
The company is on track to reduce inventories by $200 million by year's end. It's worth noting the extra small float. COLM has a 34.9 million share float compared to competitor Deckers Outdoor Co. (NYSE: DECK) with 25.8 million. However, DECK is trading at $514 per share with a forward P/E of 22.6 and a $13.4 billion market cap compared to COLM, trading at 16X forward earnings and a $4.5 billion market cap.
Columbia Sportswear CEO Tim Boyle commented, "We continue delivering innovation into the marketplace. This Spring, we enhanced the Columbia brand's collection of sun-protection and cooling technologies with the launch of Omni-Shade Broad Spectrum. Looking to Fall, we are building on the success of Omni-Heat Infinity, which will be prominently featured in our marketing campaigns.”
Lowered or Lowball Guidance?
Columbia provided lower guidance, falling short of consensus estimates. For Q3 2023, Columbia expects EPS of $1.60 to $1.70 versus $1.93 consensus analyst estimates. Q3 2023 revenues are expected to be between $995 million and $1.01 billion versus $996.76 million. Full-year 2023 EPS guidance was lowered to $4.40 to $4.65 from previous guidance of $5.15 to $5.40 versus $5.12 consensus analyst estimates.
Full-year 2023 revenues are expected between $3.53 billion to $3.59 billion, down from previous estimates of $3.57 to $3.67 billion versus $3.61 billion analyst estimates.
Columbia Sportswear analyst ratings and price targets are at MarketBeat.
Weekly Symmetrical Triangle
The weekly candlestick charts show a symmetrical triangle pattern forming since the pandemic low of $52.66 in March 2020. COLM spiked to a high of $111.19 in April 2021 and has since proceeded to make lower highs and higher lows.
The lower highs create the descending trendline, while the higher lows form the ascending trendline. The weekly MSL trigger is at $68.08. The weekly RSI is attempting to bounce towards the 50-band. Pullback supports are at $69.82, $64.05, $61.80 and $59.11.