A handful of renewable energy stocks, particularly solar and alternative energy companies, which are part of the broader Oil-Energy sector, are set to release their Q4 numbers soon. Notably, the results of these companies are expected to reflect solid installation activities as well as an increase in the shipment of their products, backed by the economic recovery witnessed in recent times that has been boosting demand.
Amid this backdrop, we expect renewable energy stocks like Sunnova Energy International NOVA and Enovix Corporation ENVX to report favorable Q4 results.
Here’s What to Expect
Per a report from the U.S. Energy Information Administration (EIA), published in January 2023, the U.S. electric power sector operated about 74 gigawatts (GW) of solar photovoltaic capacity at the end of 2022, which is about three times the capacity at the end of 2017. Moreover, U.S. wind power has grown by more than 60% since 2017 to about 143 GW of capacity.
With solar and wind energy constituting a major portion of renewable energy expansion, the aforementioned capacity enhancement is expected to get reflected in the renewable energy companies’ Q4 results.
As an evidence, Enphase Energy ENPH, a prominent solar stock, witnessed a solid 60.6% year-over-year growth in its microinverter shipment in the fourth quarter of 2022 and a 21.9% hike in battery shipment. Such solid shipments significantly boosted Enphase’s Q4 revenues significantly, a trend expected to get reflected in the results of other clean energy stocks as well.
Notably, factors like rapidly increasing corporate investments in renewables, favorable government policies such as extended federal Investment Tax Credit (ITC) for offshore wind energy, the extension of production tax credit along with the declining price of raw materials like wind turbines and solar modules are likely to have contributed to clean energy stocks’ quarterly performance.
Moreover, thanks to the economic recovery observed over the past few quarters, there has been an upward trend in installation activities for clean energy stocks, a trend expected to have driven demand in the fourth quarter of 2022 as well.
Also, growing hydropower generation has been driving revenues and earnings of clean energy stocks. In particular, hydroelectric generation in the western United States increased significantly in the 2021–22 water year relative to the 20-year low it experienced during the 2020–21 water year, as stated by EIA.
Considering all the aforementioned factors and data, both earnings and revenue projections for the broader market indicate a decent improvement from the fourth-quarter 2021 scorecard.
However, higher logistics costs and component costs as a result of global supply chain pricing pressure may have had some impact on the overall performance of the clean energy companies.
Per the latest Earnings Outlook, fourth-quarter earnings of the Oil-Energy sector are expected to improve a solid 53.5% on a 16.2% sales increase.
Given the high degree of diversity in the clean energy space, finding the right stocks with the potential to beat estimates might be quite a daunting task.
However, our proprietary Zacks methodology makes this fairly simple.
We are focusing on stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with this combination, the chances of an earnings surprise are as high as 70%.
Earnings ESP provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here we present two stocks that are expected to beat earnings estimates in this reporting cycle.
Sunnova: It is a residential solar and energy storage service provider. In October 2022, Sunnova announced that it powered the homes of over 30,000 customers with solar and battery storage in Puerto Rico during the aftermath of Hurricane Fiona, which hit the ground at the onset of the fourth quarter. This might have boosted the company’s Q4 revenues as well as customer count.
The company, with an Earnings ESP of +21.28% and a Zacks Rank #3, is slated to release earnings on Feb 22. The Zacks Consensus Estimate for NOVA’s Q4 sales indicates a solid improvement of 127.5% from the year-ago quarter’s corresponding figure.
Sunnova Energy International Inc. Price and EPS Surprise
Sunnova Energy International Inc. price-eps-surprise | Sunnova Energy International Inc. Quote
Enovix: It is involved in the design and manufacture of 3D Silicon(TM) Lithium-ion batteries. During the fourth quarter, the company signed a Memorandum of Understanding with one of the largest consumer electronics companies in the world. The agreement enables continued evaluation and prototyping of Enovix batteries targeted for consumer electronics. This is expected to have bolstered ENVX’s Q4 performance in the electronics market.
The company, with an Earnings ESP of +7.90% and a Zacks Rank #3, is slated to release earnings on Feb 22. The Zacks Consensus Estimate for ENVX’s Q4 bottom line, pegged at a loss of 15 cents, indicates a solid improvement from a loss of 60 cents incurred in the year-ago quarter.
Enovix Corporation Price and EPS Surprise
Enovix Corporation price-eps-surprise | Enovix Corporation Quote
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