On May 21, Zacks Investment Research upgraded Sunrun Inc. RUN to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Sunrun has been witnessing rising estimates on the back of strong consistent performance. This dedicated residential solar company reported a positive earnings surprise of 126.0% in the first quarter of 2016.
In fact, the company registered positive earnings surprises in three out of the last four quarters, with an average beat of 87.64%. Sunrun is well poised to enjoy the benefits of Federal Investment Tax Credit for five more years.
The company deployed 60 megawatt (MW) of solar projects in the first quarter of 2016 and expects to deploy another 60 MW in the second quarter. The company is on course to deploy 285 MW of solar projects in 2016. At the same time the company is also investing in R&D activities to lower the cost of operation. During first quarter the company invested $2.46 million in R&D, up 7.7% year over year.
Sunrun is focused on lowering operating costs and offering new products to its existing and future customers. Given its scale of operations, demand for its products and cost savings, the company expects to generate cash flow of $200 million over the next three years.
Per a U.S. Energy Information Administration (“EIA”) report, U.S. generation from renewables other than hydropower is forecast to grow by 13.3% in 2016 and by 8.6% in 2017. In spite of the rapid uptake, solar will still be just 1.1% of total U.S. utility-scale generation in 2017, indicating room for immense growth. These developments will surely benefit the U.S. based solar companies like First Solar Inc. FSLR.
Apart from utility scale solar projects, we also expect a rapid rise in residential solar energy systems, which will have a positive impact on Sunrun.
The Zacks Consensus Estimate for 2016 narrowed 18% to -$1.83 per share over the last 30 days. For 2017, the Zacks Consensus Estimate improved 3% to -$2.60 per share, over the same time frame.
Other Stock on the Horizon
Apart from Sunrun, a couple of other favorably ranked stocks in the solar space include JinkoSolar Holding Co., Ltd. JKS and Yingli Green Energy Holding Co. Ltd. YGE, both having a Zacks Rank #2 (Buy).
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