3 renewable energy stocks that just crushed profits
The earnings season is quickly drawing to a close, and as it does, investors want to look back and see who performed well, and who did not, in the growing universe of renewable energy stocks.
Three Fool.com renewable energy contributors were impressed with this quarter at Flowering energy (NYSE: BE), Enphase Energy (NASDAQ: ENPH), and TPI Composites (NASDAQ: TPIC), who emerged victorious in the long run. Here’s a look at why we liked what they reported.
Stay the course
Travis Hoium (Bloom Energy): If you’ve been following Bloom Energy stocks after earnings, it may seem like the company hasn’t crushed investor expectations. That’s because it hasn’t beaten analysts’ estimates, but that’s not the goal if you’re a long-term investor. What I’m looking for is if a business grows, improves its operations, and expands its addressable market. On these metrics, Bloom Energy crushed my expectations in Q2 2021.
Revenue increased 21.6% to $ 228.5 million due to a 41.5% increase in end customer acceptances or fuel cells. This implies that prices fall per watt sold, but higher volume overcomes price reductions. This is actually a good trend in renewables, especially if the gross margin increases at the same time.
Despite lower average selling prices, gross margin improved from 14% a year ago to 16.3%, or 18% on an adjusted basis. And that includes a low margin order that management considers an “outlier.” For the full year, management expects an adjusted gross margin of approximately 25%.
On the market expansion front, Bloom Energy is today primarily an American commercial and industrial energy backup company, using fossil fuels as a fuel source. But over the next five years, it expects to expand internationally, into hydrogen with electrolysis and clean hydrogen projects, into biogas and even into the marine market. In total, management believes these markets will have an addressable market of over $ 2,000 billion.
The market seems to be falling in love with Bloom Energy, but in the long run it is a company that continues to perform well and is heading towards equilibrium very quickly. With market potential measured in the trillions, this is still a stock I’m optimistic about today, given the earnings trends we’re seeing right now.
Overall positive trends continue
Howard Smith (Enphase Energy): Solar system technology company Enphase Energy just announced its second quarter results, and for the fourth consecutive quarterly reporting period, the company topped analysts’ average estimates for earnings per share by more than 25%. There is also a good explanation for this.
As the company continues to develop its business with increasing sales, it has also increased its gross margin. It helps more profit to reach the bottom line. The trend of increasing sales and gross margin has been fairly stable over the past three years. Note that the third quarter 2020 outlier data point occurred due to a one-time tariff rebate.
The company’s sales are expected to continue to grow as solar power generation capacity continues to expand. Enphase has also expanded its business beyond solar panel microinverters – the system components that convert direct current from the solar panel to alternating current used in the home.
Enphase has also expanded to energy storage solutions. And by adding technology that provides more convenience to customers, demand is accelerating. The company said the storage option also gives homeowners “the ability to conserve energy consumption by removing non-essential loads during an outage and thereby extending backup time.” At the end of June, the company launched its Encharge storage system in Germany, the first expansion of the product into a market outside of the United States.
In its second quarter report, Enphase offered guidance for the third quarter which implies that revenue growth will continue at a rate of 93% compared to the third quarter affected by last year’s pandemic. But that would also be a sequential 9% increase from Q2 2021 revenue midway through the outlook.
Enphase stocks are highly valued, with a forward price / earnings ratio of 84, based on data from YCharts. But if the company continues to crush estimates, it won’t take long to reach its valuation.
Tear off the proverbial bandage
Daniel Foelber (TPI Composites): Independent windblade maker TPI Composites hasn’t necessarily crushed its profits per se. But it has managed to give investors a better idea of ââwhen it will return to growth. This positive news may explain why stocks rose 8% over the past week.
For context, TPI pre-announced some of its second quarter figures at the end of July, a few weeks before the results. The numbers were not good, calling for little to no revenue growth in 2021 compared to 2020. This news, combined with broader weakness in the wind power industry, caused the market to drop. title 53% from its peak over a five-month period. .
Although TPI’s second quarter results and annual forecast were little changed from the July update, management indicated in its earnings call that regulatory uncertainty and material costs were the main cause of the its bad forecast, not the underlying activity. On the contrary, the extension of the federal tax credit for the production of renewable electricity, coupled with a renewable spending program planned by the Biden administration, reduces the pressure on companies to launch large-scale projects. The extension is ideal for operators or investors in these projects, and it supports suppliers like TPI over the long term. But in the short term, this has a negative impact on TPI as its customers are in no rush to buy more blades than they have already contracted.
However, TPI is confident in its long-term future. The company has spent the past few years expanding its generation capacity to the United States, China, Turkey and Mexico in anticipation of increased global investment in renewable energy. The timing has not worked in TPI’s favor, as its investments have yet to bear fruit. The problem is that increasing capacity costs money, which has increased expenses and resulted in consecutive years of annual losses (and possibly another annual loss this year) and higher debt on the balance sheet. As a growth stock, TPI Composites definitely ran into a problem. The good news is that management tore off the proverbial bandage by telling investors early that the year was going to be bad. The stock price discount – coupled with upside potential for those who are patient – could make TPI stock worth buying now.
Play the long game
Each of these companies is playing the long game in the field of renewable energies and their future looks bright. These may not be stocks that make the headlines, but they are disrupting every aspect of the renewable energy industry. And with earnings moving in the right direction, they may have room to grow.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.