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3 Solar Stocks Worth Investing In Ahead of Q4 Earnings

Zacks Equity Research

Year 2018 was not quite satisfactory for U.S. solar stocks, thanks to President Trump’s unfavorable stance on renewable energy issues. Nevertheless, the solar industry ended the year on a better note.  

Coming to fourth-quarter performance, the industry outperformed its broader sector. Evidently, the solar market lost 13.7% in the December quarter compared with the Zacks Oil-Energy sector’s decline of 22.2%.

We have briefly mentioned some projections that should make investors confident enough about the below mentioned solar stocks’ capability to post strong fourth-quarter numbers.

Tariff is Not a Headwind Anymore

At the onset of 2018, Trump had imposed a 30% tariff on the import of solar panels. This dealt a major blow to solar industry and pulled stocks down. Per the latest U.S. Solar Market Insight Report from Wood Mackenzie Power & Renewables and the Solar Energy Industries Association (SEIA), the U.S. solar market was down 15% year over year in the third quarter of 2018, with this tariff being the prime culprit.

However, the picture improved in the fourth quarter. Notably, the report forecasts 3.5 gigawatts (GW) of utility photovoltaic (PV) for the soon-to-be reported quarter, representing the biggest quarter for utility PV installations since the fourth-quarter of 2016, even with the tariffs.  So, the import tariff can be ruled out as a major growth inhibitor in Q4.

Bright Earnings Prospects

Stocks in the Zacks Oil-Energy sector, which includes solar stocks, are expected to exhibit year-over-year earnings growth of 64.7% on 15.2% revenue growth in the fourth quarter. This should further boost investors’ optimism for solar stocks.

What’s the Picture Ahead?

Looking beyond Q4, prospects remain bright for U.S. solar players. This is because, even after the imposition of such steep tariffs, U.S. utilities continue to transition to becoming a pure clean energy player, with investments pouring in from big corporates.

In this backdrop, factors like declining costs of solar installations as well as increased adoption of solar power by nations like India and Japan are enhancing growth opportunities for U.S. solar stocks. Such developments must have led Wood Mackenzie to lift its utility solar forecast for 2019 to 7.2 gigawatt-direct current (GWdc) from 6.9 GWdc.

Likely Q4 Outperformers

With the help of our Zacks Stock Screener, we have identified a few solar stocks that are poised to beat the Zacks Consensus Estimate in the fourth quarter. These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a favorable Zacks Rank — and hence, are likely to surpass expectations. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Canadian Solar CSIQ is a manufacturer of solar PV modules and provides turn-key solar energy solutions. The company, with a Zacks Rank #1, boasts a solid average earnings surprise of 49.7% in trailing four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Azure Power Global AZRE is an independent power producer and operator of utility and commercial scale solar PV power plants. The company, with a Zacks Rank #2 (Buy), boasts a solid average earnings surprise of 76.07% in trailing four quarters.

ReneSola Ltd SOL manufactures solar wafers. The company, with a Zacks Rank #2, boasts a solid average earnings surprise of 377.78% in trailing four quarters.

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