SunEdison, Inc. (SUNE) is set to report fourth-quarter 2013 results on Feb 19. Last quarter, the company posted a positive earnings surprise of 100.0%. Let us see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Although SunEdison delivered better-than-expected third-quarter 2013 results, its year-over-year comparisons in every operational metric were down. Solar systems sales were also lower than expected. The fourth-quarter guidance was cautious and fiscal 2013 estimates were lowered.
We believe SunEdison will benefit from the rise in demand for solar energy and the semiconductor business IPO that should further enable it to concentrate on its core competencies. Moreover, its recent partnerships and cost reduction initiatives are expected to enhance SunEdison's margins. In addition, the company has strengthened its balance sheet and also minimized its annual interest expense that will result in net savings of approximately $35.0 million per year.
Nonetheless, competition from SunPower Corp (SPWR) and First Solar Inc. (FSLR) is a concern.
Earnings Whispers?
Our proven model does not conclusively show that SunEdison will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 12 cents. Hence, the difference is 0.00%.
Zacks Rank: SunEdison’s Zacks Rank #3 (Hold), when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here is another company you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:
Hewlett-Packard Company (HPQ) has an Earnings ESP of +1.18% and holds a Zacks Rank #2 (Buy). Hewlett-Packard will report first-quarter 2014 results on Feb 20, 2014.
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