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What's in Store for Azure Power Global (AZRE) in Q3 Earnings?

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Azure Power Global Ltd. AZRE is expected to release its third-quarter fiscal 2020 results soon. In the last reported quarter, the company delivered a negative earnings surprise of 725%.

Azure Power has a four-quarter negative earnings surprise of 161.11%, on average.

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

Factors to Consider

The majority of Azure Power’s revenues is generated from the timely execution of its pipeline projects. The company is likely to have completed a rooftop project of 27 megawatts in the quarter under review, either completely or partially.

The company has been engaged in increasing output through wider deployment of cleaning technology.

We expect the company’s upcoming results to reflect solid revenue growth. In line with this, the Zacks Consensus Estimate for the fiscal third-quarter revenues is pegged at $44.2 million, suggesting 26.5% year-over-year growth.

Azure Power Global Ltd. Price and EPS Surprise

Azure Power Global Ltd. Price and EPS Surprise

Azure Power Global Ltd. price-eps-surprise | Azure Power Global Ltd. Quote

While such revenue growth expectations raise optimism for earnings growth, the company’s expenses may not have supported bottom-line improvement. Notably, Azure Power is expected to have incurred higher cost of operations in the soon-to-be-reported quarter due to land development expenses related to newly commissioned projects. Also, the negative impact of solar park projects that the company brought online is likely to have pushed up its cost.  

Moreover, the company is expected to have recorded almost $5.4 million charge in interest expenses, related to the recent issuance of second green bond, in the fiscal third quarter. Also, its depreciation and amortization expense is likely to have gone up substantially in the fiscal third quarter. Considering these developments, we remain skeptical about Azure Power’s bottom-line performance in the soon-to-be-reported quarter.

The Zacks Consensus Estimate for the fiscal third quarter is pegged at a loss of 32 cents, indicating a deterioration from earnings of 5 cents in the year-ago quarter.

In December, Azure Power closed its previously announced private placement worth $75 million and issued 6,493,506 equity shares to Caisse de depot et placement du Quebec (CDPQ). This resulted in a notable increase in the company’s outstanding shares count, which might have impacted its quarterly bottom line.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Azure Power this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances 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.

Azure Power has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

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