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Despite hailing in the top 38% of the Zacks Industry Ranks, solar ETFs are down this year by over 25%. As a flight to safety was prevalent in the first half, the sectorpaid the price of its high-beta high-growth characteristics (read: Top and Flop Sector ETFs YTD).
Also, though not directly related, the oil market rout had a ripple effect on this alternative energy segment. The common misunderstanding was that consumers dumped solar power and opted for fossil fuels in the wake of an acute plunge in oil prices.
Even positive developments like higher panel installations, a shift to fossil-fuel free energy sources by most countries to protect the environment and the U.S. tax credit extension could not help the sector in 1H.
In such a situation, it is more important to look at how sector players are performing on earnings. A few industry primes including First Solar (FSLR - Free Report) , SunPower (SPWR - Free Report) and SolarCity released their Q2 results this month.
Let’s dig into their earnings in detail below and see what impact the numbers left on solar ETFs:
SunPowerreported adjusted loss of $0.33 per share, wider than the Zacks Consensus Estimate of a loss of $0.31. In the year-ago quarter, the company had reported earnings of $0.09. On a GAAP basis, the company incurred a loss of $0.51 per share. In the year-ago quarter, it had reported earnings of $0.04.
During the quarter, SunPower generated revenues of $401.8 million, surpassing the Zacks Consensus Estimate of $341 million by 17.8%. Reported revenues also grew 6.7% from the year-ago figure of $376.7 million.
The solar panel maker reduced its revenue outlook for the year and indicated that it would lay off about 1,200 jobs, which makes up about 15% of its workforce. The company also expressed concerns over “aggressive pricing by new market entrants” that did damage to SunPower’s business. The stock plunged over 30% on August 10, post earnings release on August 9 after market close.
SolarCity, the largest U.S. residential solar installer, posted an adjusted loss of $2.32 per share, narrower than the Zacks Consensus Estimate of a loss of $2.43. However, the quarterly figure was much wider than the year-ago loss of $1.61 per share.
However, the company fared better on the revenue front with $185.8 million top line beating the Zacks Consensus Estimate of $135 million. On a year-over-year basis, reported revenues surged 80.7%.
As stated by the company earlier, it expects to install 900–1,000 MW of rooftop solar panels in 2016, down from its prior guidance of 1,000–1,100 MW. The revision was due to lower bookings in the first half of the year.
Following sluggish results after the closing bell on August 9, shares of SCTY dived 0.7% in the key trading session. The stock shed over 0.5% after hours.
First Solar,the U.S. solar manufacturer, reported strong Q2 results, on August 3 after market close, that surpassed our estimates on both the top and the bottom lines. Earnings per share of $0.87 strongly beat the Zacks Consensus Estimate of $0.58 and were well ahead of the year-ago earnings of $0.52. Revenues climbed 4.3% year over year to $934.4 millionand edged past our estimate of $904 million.
First Solar reaffirmed its revenue guidance in the band of $3.8–$4 billion. It raised the low end of the gross margin projection to the range of 18.5–19% (18–19% guided earlier)
However, the company lowered the GAAP operating income guidance to $205–$250 million ($300–$370 million projected previously). GAAP full-year earnings are now projected in the band of $3.65−$3.90 per share ($4.10−$4.50 estimated previously). Non-GAAP operating Income and non-GAAP earnings guidance were $310–$370 million and $4.20−$4.50.
Also, the company lowered the high end of its operating cash flow guidance to the $500–$650 million band from $500–$700 million expected earlier. The company reiterated its panel shipment projection of 2.9−3.0 GW.
ETFs in Focus
Given the string of mixed earnings results and disappointing share price movements in some solar stocks, solar ETFs will be on investors’ radar for the coming days. There are currently two funds available in the space that are detailed below (read: Solar ETFs Lose Their Shine on Weak Earnings):
This ETF holds 26 stocks in the basket. SolarCity, First Solar and SunPower occupy 15% of the fund’s weight. It charges investors 70 bps in fees per year (see all alternative energy ETFs here).
This fund provides global exposure to 30 solar stocks. Here, SCTY and FSLR take the top and third spots, respectively, while SPWR takes the ninth spot, with a combined 20% share (approximately). The product has an expense ratio of 0.65%.
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Dark Could Over Solar ETFs Post Q2 Earnings?
Despite hailing in the top 38% of the Zacks Industry Ranks, solar ETFs are down this year by over 25%. As a flight to safety was prevalent in the first half, the sectorpaid the price of its high-beta high-growth characteristics (read: Top and Flop Sector ETFs YTD).
Also, though not directly related, the oil market rout had a ripple effect on this alternative energy segment. The common misunderstanding was that consumers dumped solar power and opted for fossil fuels in the wake of an acute plunge in oil prices.
Even positive developments like higher panel installations, a shift to fossil-fuel free energy sources by most countries to protect the environment and the U.S. tax credit extension could not help the sector in 1H.
In such a situation, it is more important to look at how sector players are performing on earnings. A few industry primes including First Solar (FSLR - Free Report) , SunPower (SPWR - Free Report) and SolarCity released their Q2 results this month.
Let’s dig into their earnings in detail below and see what impact the numbers left on solar ETFs:
SunPower reported adjusted loss of $0.33 per share, wider than the Zacks Consensus Estimate of a loss of $0.31. In the year-ago quarter, the company had reported earnings of $0.09. On a GAAP basis, the company incurred a loss of $0.51 per share. In the year-ago quarter, it had reported earnings of $0.04.
During the quarter, SunPower generated revenues of $401.8 million, surpassing the Zacks Consensus Estimate of $341 million by 17.8%. Reported revenues also grew 6.7% from the year-ago figure of $376.7 million.
The solar panel maker reduced its revenue outlook for the year and indicated that it would lay off about 1,200 jobs, which makes up about 15% of its workforce. The company also expressed concerns over “aggressive pricing by new market entrants” that did damage to SunPower’s business. The stock plunged over 30% on August 10, post earnings release on August 9 after market close.
SolarCity, the largest U.S. residential solar installer, posted an adjusted loss of $2.32 per share, narrower than the Zacks Consensus Estimate of a loss of $2.43. However, the quarterly figure was much wider than the year-ago loss of $1.61 per share.
However, the company fared better on the revenue front with $185.8 million top line beating the Zacks Consensus Estimate of $135 million. On a year-over-year basis, reported revenues surged 80.7%.
As stated by the company earlier, it expects to install 900–1,000 MW of rooftop solar panels in 2016, down from its prior guidance of 1,000–1,100 MW. The revision was due to lower bookings in the first half of the year.
Following sluggish results after the closing bell on August 9, shares of SCTY dived 0.7% in the key trading session. The stock shed over 0.5% after hours.
First Solar,the U.S. solar manufacturer, reported strong Q2 results, on August 3 after market close, that surpassed our estimates on both the top and the bottom lines. Earnings per share of $0.87 strongly beat the Zacks Consensus Estimate of $0.58 and were well ahead of the year-ago earnings of $0.52. Revenues climbed 4.3% year over year to $934.4 millionand edged past our estimate of $904 million.
First Solar reaffirmed its revenue guidance in the band of $3.8–$4 billion. It raised the low end of the gross margin projection to the range of 18.5–19% (18–19% guided earlier)
However, the company lowered the GAAP operating income guidance to $205–$250 million ($300–$370 million projected previously). GAAP full-year earnings are now projected in the band of $3.65−$3.90 per share ($4.10−$4.50 estimated previously). Non-GAAP operating Income and non-GAAP earnings guidance were $310–$370 million and $4.20−$4.50.
Also, the company lowered the high end of its operating cash flow guidance to the $500–$650 million band from $500–$700 million expected earlier. The company reiterated its panel shipment projection of 2.9−3.0 GW.
ETFs in Focus
Given the string of mixed earnings results and disappointing share price movements in some solar stocks, solar ETFs will be on investors’ radar for the coming days. There are currently two funds available in the space that are detailed below (read: Solar ETFs Lose Their Shine on Weak Earnings):
Guggenheim Solar ETF (TAN - Free Report)
This ETF holds 26 stocks in the basket. SolarCity, First Solar and SunPower occupy 15% of the fund’s weight. It charges investors 70 bps in fees per year (see all alternative energy ETFs here).
Market Vectors Solar Energy ETF (KWT - Free Report)
This fund provides global exposure to 30 solar stocks. Here, SCTY and FSLR take the top and third spots, respectively, while SPWR takes the ninth spot, with a combined 20% share (approximately). The product has an expense ratio of 0.65%.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>