David Hay — Friday POW!: Generac (GNRC) — "Generating Power... And Profits": the C&I/data-center transformation the market is finally recognizing — Q2 C&I sales +29% to $556M (after +28% in Q1), a ~$1.6B data-center backlog (+~$1B since the prior update, $1.35B scheduled for 2027), ~$1B of new data-center orders in the 90 days to Jun 30 (~$11M/day), ~$700M of committed 2027 volume with one hyperscaler plus a global supply agreement with a second, FY data-center revenue guidance raised to $450M, Enercon + an Illinois large-megawatt packaging plant acquired against contracted demand; C&I now ~47% of external sales vs ~41%, adj. EBITDA guided from $690M (2025) to ~$1.01B (2026) and ~$1.19B (2027) on adj. EPS $5.14 → $9.75 → $11.82, at ~18.2× forward earnings and 2.7× trailing sales with a $500M buyback authorization untouched; residential is now optionality (Q2 sales −2%, 34.7% EBITDA margin of which ~9pp was tariff refunds) with a probable "Super" El Niño as the free call — after a +90% run and a one-third correction the stock sits on the 200-day and the 50% Fibonacci retracement, "an intriguing play near the $200 area." Written with frequent Haymaker contributor Daniel Bustamante (Aug 28 2026)

One-line take: a single-name POW! — Generac (GNRC), positive, "an intriguing play near the $200 area" — and the cleanest example this month of the house's backlog-conversion screen. The thesis is a re-classification, not a forecast. "Generac is no longer simply a residential generator company dependent on hurricanes and power outages. The company is developing a second earnings engine in Commercial & Industrial (C&I) power equipment, with data-center demand accelerating faster than the market previously expected. At the same time, the legacy residential business is becoming more profitable, even without a major weather-driven demand cycle." The consequence is stated as the actual investment case: "the company can produce meaningful earnings growth without requiring both businesses to peak simultaneously" — two engines, either of which alone carries the year. The position in the AI trade is deliberately contrarian in its framing: "while others are worrying about CapEx spend on the hyperscalers, Generac has been, and will continue to be, a net benefactor of said spend" — the hyperscaler capex that is a risk to the AI complex is revenue here. The acceleration is now a trend, not a quarter. "Second-quarter C&I sales increased 29% to $556 million, driven primarily by products sold into the global data-center market. This followed 28% C&I growth in the first quarter, meaning the acceleration is no longer based on a single quarter or a hypothetical pipeline which was the market concern just over a year ago." The visibility is the product. "Generac now has an approximately $1.6 billion data-center backlog, an increase of roughly $1 billion since its previous update. That backlog does not include committed volume from the company's second hyperscale agreement, making the reported figure potentially conservative." Five actions are listed as evidence the company is "investing against contracted demand, not merely building capacity in anticipation of demand that may never arrive": ~$700M of committed 2027 volume finalized with one leading hyperscale customer; a global supply agreement signed with a second; product-specific terms being negotiated for that customer's 2027 and 2028 volume; Enercon acquired (generator controls and packaging); and an additional Illinois facility acquired for large-megawatt packaging capacity. The order rate is given as a run-rate: "approximately $1 billion in new data center orders in the 90 days ending June 30, or roughly $11 million per day," with "$1.35 billion scheduled for 2027" — "a significant portion of next year's commercial and industrial revenue is already contracted" — and guidance raised to "$450 million" of full-year data-center revenue. CEO Aaron Jagdfeld describes the market as "unlike anything we've seen before." Why the demand is physical rather than thematic: "every large-scale data center requires multi-megawatt backup generation capable of carrying the full facility load through grid outages. Well, Generac manufactures those very generators at a scale (and service network) that new entrants cannot replicate quickly." The re-rating mechanism is a mix shift, stated explicitly: data centers improve earnings quality three ways — visibility (multi-year supply agreements), scale (large-megawatt project values dwarf residential units) and diversification (less dependent on outage activity and consumer discretionary demand) — and "C&I represented approximately 47% of second-quarter external sales, compared with roughly 41% in the prior-year period," so "Generac increasingly resembles a diversified power-infrastructure company rather than a pure residential generator manufacturer. That distinction is important because infrastructure businesses with visible backlogs and secular growth generally receive higher and more durable valuation multiples than highly cyclical consumer-equipment companies." Residential is re-framed from thesis to option. "The residential segment is no longer the primary reason to own the stock, but it retains valuable upside optionality," including the retail flow that arrives with weather events ("see the 2021 Texas freeze storm"). Q2 residential sales fell "approximately 2%," home-standby offset part of the weakness in portables and storage, and the margin is disclosed with its distortion attached: "residential adjusted EBITDA margin reached 34.7%, although roughly nine percentage points came from tariff refunds" — with the durable half named separately, "favorable mix and operating efficiencies also supported profitability." The conclusion: "the current thesis does not require a major hurricane season," while a "Super" El Niño "this year and next seems probable" (per the NWS map) — a free call layered on a business that no longer needs it. The numbers. Revenue "+17.4% in 2026 and +21.3% in 2027" (~$4.94B then ~$6.0B); adjusted EBITDA "from $690 million in 2025 to $1.01 billion in 2026 and $1.19 billion in 2027"; EBITDA margin "from 16.4% in 2025 to 20.5% in 2026"; adjusted EPS "from $5.14 in 2025 to $9.75 in 2026 and $11.82 in 2027"; free cash flow "approximately $353 million in 2026 and $478 million in 2027"; and a balance sheet of "approximately $1.33 billion of debt against $265 million of cash," EV "roughly $13.0 billion." Main takeaway as written: "GNRC is entering a new earnings-expansion cycle, with data-center demand producing both faster revenue growth and meaningful operating leverage." Valuation is doing none of the work — which is the point. "The Company trades at roughly 18.2x forward earnings and 2.7x trailing sales, well below its 2021 peak and near the middle of its post-2022 valuation range. Despite the data-center growth story, the stock's multiple has recently compressed, suggesting earnings expectations, not valuation expansion, are now doing most of the work." A $500 million repurchase authorization approved February 9, 2026 for 24 months is entirely unused as of June 30 — "an option which management can activate at any time." The entry is technical and explicit. "The stock is hovering right on the 200-day moving average and given the +90% run up to start the year this pullback provides a potential area for new longs. For the Fibonacci folks out there, we are also testing the 50% retracement (from the December lows to the June 2026 highs) which already found buyers back in July." The verdict: "the earnings inflection is visible, management has raised expectations, and the company has secured meaningful contracted demand… the story boils down to one question: 'How big can the C&I business become?'… Given the rapid rise earlier this year the stock was clearly pricing in the re-rating of this business but now that it's pulled back, it provides an intriguing play near the $200 area." No portfolio tables with this issue (no Haymaker Buy / Trims-Holds lists published).

1. Stocks & names mentioned

Ticker	Name	Research	View	What he said	At
GNRC	Generac Holdings	QT · SA · STK · FA	Positive	Pick of the Week — the C&I/data-center transformation "the market is finally recognizing" (written with contributor Daniel Bustamante). "Generac is no longer simply a residential generator company dependent on hurricanes and power outages": a second earnings engine in Commercial & Industrial is scaling "with data-center demand accelerating faster than the market previously expected," while residential "is becoming more profitable, even without a major weather-driven demand cycle" — so "the company can produce meaningful earnings growth without requiring both businesses to peak simultaneously." Positioning against the AI-capex worry is explicit: "while others are worrying about CapEx spend on the hyperscalers Generac has been, and will continue to be, a net benefactor of said spend." Evidence: Q2 C&I sales +29% to $556M after +28% in Q1 — "the acceleration is no longer based on a single quarter or a hypothetical pipeline"; an approximately $1.6B data-center backlog, "an increase of roughly $1 billion since its previous update," which "does not include committed volume from the company's second hyperscale agreement," with $1.35B scheduled for 2027; ~$1B of new data-center orders in the 90 days ending June 30 ("roughly $11 million per day"); FY data-center revenue guidance raised to $450M; ~$700M of committed 2027 volume finalized with one hyperscaler, a global supply agreement signed with a second and 2027/2028 product terms under negotiation; and capacity bought against it — Enercon (generator controls and packaging) plus an additional Illinois large-megawatt packaging facility — "investing against contracted demand, not merely building capacity in anticipation of demand that may never arrive." CEO Aaron Jagdfeld: the data-center market is "unlike anything we've seen before." Why the moat is physical: "every large-scale data center requires multi-megawatt backup generation capable of carrying the full facility load through grid outages," made at a "scale (and service network) that new entrants cannot replicate quickly." The re-rating logic: data centers add visibility, scale and diversification, and C&I is ~47% of Q2 external sales vs ~41% a year earlier, so Generac "increasingly resembles a diversified power-infrastructure company" and such businesses "generally receive higher and more durable valuation multiples than highly cyclical consumer-equipment companies." Residential = optionality: Q2 sales −2% but a 34.7% adjusted EBITDA margin of which "roughly nine percentage points came from tariff refunds," with "favorable mix and operating efficiencies" the durable part; "the current thesis does not require a major hurricane season," while a "Super" El Niño "this year and next seems probable" and retail flows chase weather events ("see the 2021 Texas freeze storm"). Financials (consensus): revenue +17.4% (2026) / +21.3% (2027) to ~$4.94B then ~$6.0B; adj. EBITDA $690M → $1.01B → $1.19B; EBITDA margin 16.4% → 20.5%; adj. EPS $5.14 → $9.75 → $11.82; FCF ~$353M then ~$478M; $1.33B debt vs $265M cash, EV ~$13.0B. Valuation: "roughly 18.2x forward earnings and 2.7x trailing sales, well below its 2021 peak and near the middle of its post-2022 range… the stock's multiple has recently compressed, suggesting earnings expectations, not valuation expansion, are now doing most of the work." A $500M buyback authorization (approved Feb 9, 2026; 24 months) is entirely unused — "an option which management can activate at any time." Entry: after "a +90% run up to start the year" and a one-third correction, the stock "is hovering right on the 200-day moving average" and is "testing the 50% retracement (from the December lows to the June 2026 highs) which already found buyers back in July" — the confluence "could see us begin to consolidate well and make our next leg higher into the back half of the year." Verdict: "the story boils down to one question: 'How big can the C&I business become?'… now that it's pulled back, it provides an intriguing play near the $200 area."	read ↗

"View" is Haymaker's stance in this post. GNRC is the only name rated — a single-security deep dive; this edition was written with frequent Haymaker contributor Daniel Bustamante and carries no portfolio tables (no Buy / Trims-Holds lists). Referenced only (not rowed): Enercon (private — acquired by Generac "to expand its capabilities in generator controls and packaging"; named as an acquisition, with no view taken), the additional Illinois facility acquired for large-megawatt packaging capacity, the two unnamed hyperscale customers (one with ~$700M of committed 2027 volume, one under a global supply agreement), CEO Aaron Jagdfeld ("unlike anything we've seen before"), the March 2026 Investor Day CapEx/demand-growth slide, the National Weather Service "Super" El Niño map (via The Weather Channel), and Bloomberg (the financials, valuation and technical charts). Research: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis.

2. Talking points

The frame — a company being re-classified, not re-forecast

"Generac is no longer simply a residential generator company dependent on hurricanes and power outages. The company is developing a second earnings engine in Commercial & Industrial (C&I) power equipment, with data-center demand accelerating faster than the market previously expected."
The second half of the change is the one that gets skipped: "at the same time, the legacy residential business is becoming more profitable, even without a major weather-driven demand cycle."
The five-line statement of the new case: C&I and data centers give structural growth; residential gives earnings leverage if outage activity normalizes; higher volumes and efficiencies expand margins; a growing backlog gives "unusually strong visibility into 2027"; and — the payoff line — "the company can produce meaningful earnings growth without requiring both businesses to peak simultaneously."

Sitting on the other side of the hyperscaler-capex worry

"So, while others are worrying about CapEx spend on the hyperscalers Generac has been, and will continue to be, a net benefactor of said spend."
The reference point is the company's own March 2026 Investor Day slide "highlighting the CapEx spend and the demand-growth forecast which is significant" — the argument being that Generac "has been capturing and executing on this cycle," i.e. the capex has already converted into orders rather than remaining a projection.
Note the structural point buried in the framing: the same spending line that is the risk in the AI complex (unsustainable capex) is the revenue here, which is what makes this a different expression of the AI-power theme than owning the hyperscalers or the chips.

The inflection — and the honest note on what has already been priced

"The most important development is the acceleration of Generac's C&I business."
The move is conceded before it is used: "the stock has already begun to reflect this transition as it was up nearly +90% earlier this year prior to a one-third correction of its previously overbought condition. However, the earnings cycle is not necessarily finished."
And the condition on the next leg is stated as a test, not a hope: "the next phase depends on Generac converting its data-center backlog into revenue while demonstrating that the resulting growth is durable beyond the current order cycle."

Two quarters, not one — the acceleration stops being a pipeline story

"Second-quarter C&I sales increased 29% to $556 million, driven primarily by products sold into the global data-center market."
"This followed 28% C&I growth in the first quarter, meaning the acceleration is no longer based on a single quarter or a hypothetical pipeline which was the market concern just over a year ago" — the named bear objection, dated, and shown to have been answered by print rather than by argument.

The backlog — $1.6B, and deliberately understated

"Generac now has an approximately $1.6 billion data-center backlog, an increase of roughly $1 billion since its previous update."
The conservatism is spelled out: "that backlog does not include committed volume from the company's second hyperscale agreement, making the reported figure potentially conservative relative to the full opportunity."
The order rate expressed as a run-rate: "approximately $1 billion in new data center orders in the 90 days ending June 30, or roughly $11 million per day."

Five actions that make it contracted demand rather than speculative capacity

"Finalized an agreement containing nearly $700 million of committed 2027 volume with one leading hyperscale customer." · "Signed a global supply agreement with a second hyperscale customer." · "Begun negotiating product-specific terms for that customer's 2027 and 2028 volume."
"Acquired Enercon to expand its capabilities in generator controls and packaging." · "Acquired an additional Illinois facility to increase large-megawatt packaging capacity."
The reading of the list is the insight: "these actions indicate Generac is investing against contracted demand, not merely building capacity in anticipation of demand that may never arrive" — capex following a signed order book is a different risk profile from capex following a forecast.

Why this matters — the grid, and the weather leg reframed

The old identity: "historically, investors valued Generac primarily as a weather-sensitive residential equipment company. Strong hurricane seasons created demand surges, while quiet outage periods produced inventory corrections and earnings volatility."
The weather is kept, but demoted to context: "it is worth touching on broader grid vulnerabilities which Generac's expansive solution suite is designed to address. The hurricane topic is front of mind for many, as a so-called 'Super' El Niño this year and next seems probable" (per the NWS map via The Weather Channel).
The physical requirement that makes data centers a generator market at all: "every large-scale data center requires multi-megawatt backup generation capable of carrying the full facility load through grid outages. Well, Generac manufactures those very generators at a scale (and service network) that new entrants cannot replicate quickly."

The CEO quote and the contracted share of 2027

"Generac's CEO Aaron Jagdfeld describes the data center market as, 'unlike anything we've seen before,' the Q2 numbers appear to back it up."
"The $1.6 billion backlog with $1.35 billion scheduled for 2027 means a significant portion of next year's commercial and industrial revenue is already contracted."
"Management raised full-year data center revenue guidance to $450 million and secured two multi-year hyperscale agreements in a single quarter."

Three ways data centers improve the quality of the earnings

"Visibility: large customer orders and multi-year supply agreements provide a clearer and more reliable revenue pipeline."
"Scale: large-megawatt generators carry significantly larger project values than traditional residential products."
"Diversification: growth becomes less dependent on residential outage activity and consumer discretionary demand."

The mix shift is the re-rating argument

"C&I represented approximately 47% of second-quarter external sales, compared with roughly 41% in the prior-year period."
"As data-center revenue grows, Generac increasingly resembles a diversified power-infrastructure company rather than a pure residential generator manufacturer."
The valuation consequence, stated as a general rule: "that distinction is important because infrastructure businesses with visible backlogs and secular growth generally receive higher and more durable valuation multiples than highly cyclical consumer-equipment companies."

Residential — from thesis to optionality (with the margin disclosed honestly)

"The residential segment is no longer the primary reason to own the stock, but it retains valuable upside optionality, especially given retail investors who tend to trade it when there are major weather events - see the 2021 Texas freeze storm."
The quarter: "second-quarter residential sales declined approximately 2%, yet home-standby generator sales increased enough to offset part of the weakness in portable generators and energy storage. Residential adjusted EBITDA margin reached 34.7%, although roughly nine percentage points came from tariff refunds."
The part that survives the adjustment: "the more important development was that favorable mix and operating efficiencies also supported profitability." Conclusion: "the current thesis does not require a major hurricane season, but elevated outage activity could still generate incremental demand, dealer installations, and portable-generator sales… the C&I business is what the market cares about, at least in this cycle."

The financials — operating leverage, not just growth

"After declining slightly in 2025, consensus expects revenue to reach approximately $4.94 billion in 2026 and nearly $6.0 billion in 2027" — "+17.4% in 2026 and +21.3% in 2027."
"The more important development is the operating leverage: adjusted EBITDA is projected to increase from $690 million in 2025 to more than $1.0 billion in 2026 and nearly $1.2 billion in 2027" ($1.01B / $1.19B), with the margin recovering "from 16.4% in 2025 to 20.5% in 2026."
Adjusted EPS "from $5.14 in 2025 to $9.75 in 2026 and $11.82 in 2027"; free cash flow "approximately $353 million in 2026 and $478 million in 2027"; balance sheet "approximately $1.33 billion of debt against $265 million of cash, producing enterprise value of roughly $13.0 billion." Takeaway: "GNRC is entering a new earnings-expansion cycle."

The unused buyback

"Generac currently has a $500 million share-repurchase authorization, approved on February 9, 2026, for a 24-month period. Remaining authorization: $500 million as of June 30, 2026."
Nothing has been spent — which is why the close treats it as a lever rather than a support: "their share buyback authorization remains an option which management can activate at any time."

Valuation — the multiple compressed into the growth story

"The Company trades at roughly 18.2x forward earnings and 2.7x trailing sales, well below its 2021 peak and near the middle of its post-2022 valuation range."
The observation that makes it a pick rather than a story: "despite the data-center growth story, the stock's multiple has recently compressed, suggesting earnings expectations, not valuation expansion, are now doing most of the work" — i.e. the buyer is paying for delivery, not for enthusiasm.

The technicals — a 200-day / 50%-Fibonacci confluence that has already been tested

"The stock is hovering right on the 200-day moving average and given the +90% run up to start the year this pullback provides a potential area for new longs."
"For the Fibonacci folks out there, we are also testing the 50% retracement (from the December lows to the June 2026 highs) which already found buyers back in July" — a level with a demonstrated bid, not merely a drawn line.
"This combined with the 200-day could see us begin to consolidate well and make our next leg higher into the back half of the year."

The conclusion — one question, and a price

"Generac has moved beyond the early turnaround stage. The earnings inflection is visible, management has raised expectations, and the company has secured meaningful contracted demand."
"The story, at this point, boils down to one question: 'How big can the C&I business become?'" — with the answer's floor already contracted: "the $1.6 billion backlog, nearly $700 million of committed 2027 volume and a second hyperscale agreement materially improve the visibility of the next earnings cycle. Meanwhile, the residential business remains profitable optionality rather than the sole driver of the investment case."
The call: "given the rapid rise earlier this year the stock was clearly pricing in the re-rating of this business but now that it's pulled back, it provides an intriguing play near the $200 area."

3. In plain English

A jargon-free note on why the name is cited. (Companion to the table above; renders on the name's consolidated page.)

GNRC — Generac Holdings Positive

Generac makes generators — the machines that produce electricity when the grid stops delivering it. Most people know the company for the box in the back garden that keeps the lights and fridge on when a storm takes the power out. That business is real, but it is also the reason the stock has always been treated as a weather bet: a bad hurricane season meant a rush of orders, a quiet one meant unsold inventory and disappointing profits. Haymaker's argument, written this week with contributor Daniel Bustamante, is that this is no longer what the company is.

The change is a second business that has been growing quietly and is now impossible to miss: Commercial & Industrial equipment, and specifically the very large generators that data centers must install. This is a physical requirement, not a fashion. A data center cannot afford to go dark for even a moment, so every large one is built with backup generation capable of carrying the entire building's electrical load on its own if the grid fails. Those are multi-megawatt machines — hundreds of times bigger than a home unit — and there are only a handful of firms that can build, package, ship and service them at scale. Generac is one of them, and as the post puts it, that scale and service network is something "new entrants cannot replicate quickly."

The evidence that this is working is order flow, which is the hardest kind of evidence to fake. Commercial sales rose 29% in the second quarter to $556 million, following 28% growth in the first — two quarters, so it is a trend rather than a fluke. The order book for data centers alone is now about $1.6 billion, up roughly $1 billion since the last update, and about $1.35 billion of it is scheduled to be delivered in 2027 — meaning a large part of next year's revenue is already signed, not hoped for. In the three months to the end of June the company took in around $1 billion of new data-center orders, which works out at roughly $11 million a day. The reported backlog also leaves out committed volume from a second giant cloud customer, so the real figure is probably higher than the one disclosed.

Two of those giant customers — "hyperscalers," the handful of companies like the big cloud providers that build data centers at enormous scale — are now under contract: one with nearly $700 million of committed 2027 volume, and a second under a global supply agreement with 2027 and 2028 volumes being negotiated. Generac has responded by buying capacity: Enercon, a business that makes generator controls and does packaging, and an extra factory in Illinois for assembling the largest machines. The distinction Haymaker draws is important — the company is spending money against orders it already has, rather than building factories hoping demand shows up. That is a much lower-risk form of expansion.

There is also a neat inversion here worth noticing. Much of the market is nervous that the enormous sums the cloud companies are spending on AI data centers cannot last. For Generac, that spending is not a risk but a customer: "while others are worrying about CapEx spend on the hyperscalers Generac has been, and will continue to be, a net benefactor of said spend."

Why this should change the price of the shares comes down to what kind of company investors think they are buying. A consumer-equipment maker whose sales rise and fall with the weather is valued cautiously, because its earnings are unreliable. An infrastructure supplier with a signed multi-year order book is valued more generously, because you can see the revenue coming. Commercial sales were about 47% of the quarter's external revenue, up from roughly 41% a year earlier — so the company is steadily becoming the second kind of business, and that shift alone can justify a higher multiple even before profits grow.

The home-generator business has not disappeared; it has been demoted from the reason to own the stock to a free extra. Residential sales actually fell about 2% last quarter, yet the segment's profit margin reached 34.7% — although roughly nine of those percentage points came from tariff refunds, a one-off, and Haymaker says so plainly rather than quoting the flattering headline. The durable part of the improvement came from a better product mix and more efficient production. And there is a genuine call option attached: forecasters think a "Super" El Niño is probable this year and next, which would mean more storms, more outages and a rush of home-generator buying — plus the retail traders who pile into the stock every time the weather makes the news, as they did during the 2021 Texas freeze. None of that is required for the thesis to work, which is exactly what makes it optionality rather than a bet.

The numbers analysts now expect: revenue growing 17.4% in 2026 and 21.3% in 2027, to roughly $4.94 billion and then almost $6 billion. Profits grow much faster than sales — the mark of "operating leverage," where a factory that is already built and staffed produces more without proportionally more cost — with adjusted EBITDA (a rough measure of cash profit from operations) going from $690 million in 2025 to about $1.01 billion in 2026 and $1.19 billion in 2027, and adjusted earnings per share from $5.14 to $9.75 to $11.82. Debt is modest at about $1.33 billion against $265 million of cash. There is also a $500 million buyback authorization approved in February that management has not spent a penny of — a lever they can pull at any time.

What makes this interesting rather than merely good is that the stock is not expensive. It trades at about 18.2 times next year's expected earnings and 2.7 times sales — well below its 2021 peak and near the middle of its range since 2022. The line worth remembering: "the stock's multiple has recently compressed, suggesting earnings expectations, not valuation expansion, are now doing most of the work." In plain terms, you are not being asked to pay up for the story; the share price is being carried by actual profit growth.

Finally, the timing. The stock ran up almost 90% earlier this year, got over-extended, and has since given back a third of that. It now sits on two levels at once: its 200-day moving average — the average price over roughly the past year, a common line long-term buyers watch — and the halfway point of the whole rally measured from the December lows to the June highs, a level that already attracted buyers back in July. Haymaker's conclusion is that the earnings inflection is visible and largely contracted, the remaining question is simply "how big can the C&I business become," and after the pullback the shares are "an intriguing play near the $200 area."

Summary derived from the paid Haymaker newsletter (text in transcript.txt); this edition was written with contributor Daniel Bustamante. For personal study. Not investment advice. © Haymaker / David Hay for source material.