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What's in Store for SolarEdge (SEDG) This Earnings Season?

Zacks Equity Research
·4-min read

SolarEdge Technologies, Inc. SEDG is set to report first-quarter 2020 results on May 6, after market close. In the last reported quarter, the company delivered a positive earnings surprise of 26.92%.

Moreover, the bottom line outpaced the Zacks Consensus Estimate in the trailing four quarters, the average beat being 1.05%.

Let’s see how things have shaped up prior to this announcement.

Factors at Play

Backed by growing demand for its solar products, SolarEdge has been shipping record number of its power optimizers and inverters in domestic market as well as overseas. We expect a similar trend to have persisted in the January-March 2020 quarter, which, in turn must have boosted the company’s quarterly revenues.

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In fact, anticipating increased demand for its products in 2020 and the usual manufacturing slowdown during the Chinese New Year, SolarEdge built inventory in fourth-quarter 2019 and shipped it to its distribution centers. This also provided the company a safeguard against the coronavirus outbreak that restricted shipments during the last few weeks of the first quarter, worldwide.

SolarEdge Technologies, Inc. Price and EPS Surprise

SolarEdge Technologies, Inc. Price and EPS Surprise
SolarEdge Technologies, Inc. Price and EPS Surprise

SolarEdge Technologies, Inc. price-eps-surprise | SolarEdge Technologies, Inc. Quote

Moreover, SolarEdge arranged for its manufacturing process to continue even during the Chinese New Year at reduced rates. As a result, when the Chinese New Year vacation was extended due to the coronavirus outbreak, its manufacturing lines in China continued to operate. These two measures combined with increasing capacity in its factories in Hungary and Vietnam must have enabled the company to duly meet its delivery commitments during the first quarter, thereby bolstering its top line.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $420.6 million, indicating 54.7% surge from the figure reported in the year-ago quarter.

SolarEdge has been making significant efforts to reduce its accrued warranty expenses by lowering cost of replaced and refurbished products as well as logistic costs. This, in turn, must have boosted its gross margin, thereby pushing up quarterly earnings. The aforementioned revenue growth expectation also remains a key contributor to bottom-line growth.

The Zacks Consensus Estimate for first-quarter earnings is pegged at $1.22 per share, suggesting solid improvement of 90.6% from the year-earlier quarter’s 64 cents.

However, due to increased demand and coronavirus impact, the company must have conducted increased air shipments. Costs related to these shipments might have weighed on its adjusted solar margin. The upcoming results should duly reflect such developments.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for SolarEdge this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

SolarEdge has an Earnings ESP of +1.03% and a Zacks Rank #3.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Upcoming Solar Releases

Enphase Energy ENPH has a Zacks Rank #2 and is set to report first-quarter 2020 results on May 5, after market close.

First Solar FSLR has a Zacks Rank #3 and is set to release first-quarter 2020 results on May 7.

Vivint Solar VSLR carries a Zacks Rank #3 and is expected to post first-quarter 2020 results on May 7.

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First Solar, Inc. (FSLR) : Free Stock Analysis Report
 
Enphase Energy, Inc. (ENPH) : Free Stock Analysis Report
 
Vivint Solar, Inc. (VSLR) : Free Stock Analysis Report
 
SolarEdge Technologies, Inc. (SEDG) : Free Stock Analysis Report
 
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Zacks Investment Research