Gencor Stock Dips After Q4 Earnings Despite Full-Year Revenue Gain

Shares of Gencor Industries, Inc. GENC have lost 0.8% since the company reported its earnings for the quarter ended Sept. 30, 2024. This compares to the S&P 500 Index’s 1.5% gain over the same time frame. Over the past month, the stock gained 2.9% compared with the S&P 500’s 4.4% rise.GENC’s Revenue and Earnings PerformanceGencor’s net revenues for the fourth quarter of fiscal 2024 came in at $20.92 million, essentially flat compared to $20.87 million in the year-ago period. In the fourth quarter of fiscal 2024, gross profit margin was 25.6% compared with 31.7% in the fourth quarter of fiscal 2023. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)In the fiscal fourth quarter, operating income decreased to $1.2 million from $2.7 million, while net income fell to $1.5 million from $3.1 million, primarily due to higher tax expenses and lower margins.For fiscal 2024, Gencor posted net revenues of $113.2 million, marking a 7.7% increase from the $105.1 million reported in fiscal 2023. Despite this top-line growth, net income dipped 0.7% to $14.6 million, or $0.99 per share, from $14.7 million, or $1.00 per share, in the prior year. The gross profit margin remained essentially flat at 27.7% compared with 27.6% in the previous year.Operating income inched up 1.9% to $13.7 million from $13.4 million, as higher revenue was offset by a 17.9% rise in selling, general and administrative (SG&A) expenses, which totaled $14.3 million in fiscal 2024 compared with $12.2 million. Product engineering and development costs declined 4.2% to $3.3 million from $3.5 million, attributed to reduced headcount. By contrast, higher trade show costs, professional fees and sales commissions drove the SG&A increase.Gencor’s Segmental and Operational BreakdownGencor’s revenue growth was primarily driven by a 34.1% increase in equipment sales recognized over time, which rose from $34.2 million in fiscal 2023 to $45.8 million in fiscal 2024. However, this was partly offset by a 13.3% decline in equipment sales recognized at a point in time, which dropped from $40.1 million to $34.8 million. Parts and component sales rose 4.6% to $26.5 million from $25.3 million. Freight revenue contributed $5.2 million, a 10.9% increase from $4.7 million in fiscal 2023.Gencor Industries Inc. Price, Consensus and EPS Surprise Gencor Industries Inc. price-consensus-eps-surprise-chart | Gencor Industries Inc. QuoteGENC’s Other Key Business MetricsNet other income for fiscal 2024 surged 31.6% to $7 million from $5.4 million in fiscal 2023, largely due to an increase in interest and dividend income to $3.4 million (up 62.9% from $2.1 million) and realized/unrealized gains on marketable securities which climbed 11.7% to $3.6 million from $3.2 million. The increase in interest income reflects a strategic shift toward fixed-income investments in a higher rate environment.The company's effective tax rate rose significantly to 29.8% from 21.9%, mainly due to a $1.2 million increase in reserves for unrecognized tax benefits.Gencor ended fiscal 2024 with $115.4 million in cash and marketable securities, up from $101.3 million in the prior fiscal year, and it remained debt-free. Working capital stood at $182.2 million in fiscal 2024, up from $164.8 million in fiscal 2023.Gencor’s Management CommentaryPresident Marc Elliott emphasized GENC’s steady revenue in the fourth quarter of fiscal 2024 despite margin compression, particularly in aftermarket sales. Elliott highlighted the 7.7% full-year revenue growth as a testament to the company’s resilience and positioning amid continued IIJA (Infrastructure Investment and Jobs Act) infrastructure funding. Elliott noted that a strong backlog will support the first half of fiscal 2025 and reaffirmed management’s focus on market growth and delivering high-quality products and services.Factors Influencing GENC’s PerformanceThe decrease in gross margin in the fiscal fourth quarter from 31.7% in 2023 to 25.6% in 2024 was a significant contributor to the decline in quarterly operating income, which fell to $1.2 million from $2.7 million. This margin pressure stemmed from a more competitive aftermarket landscape and less favorable absorption of fixed costs. These dynamics underscore the challenge of maintaining profitability in a maturing product cycle.Gencor’s GuidanceGencor did not provide specific financial guidance for fiscal 2025. However, management's qualitative outlook remains optimistic. Elliott’s remarks suggest confidence in the company’s operational momentum, particularly as demand for infrastructure-related equipment remains buoyed by government spending.GENC’s Other DevelopmentsThere were no reported acquisitions, divestitures or business restructurings for the quarter ended Sept. 30, 2024. However, management alluded to ongoing investments in engineering and product development, underscoring a strategic emphasis on innovation rather than structural realignment.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. 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