SolarCity Corp. (SCTY) will release third-quarter 2014 financial results after the market closes on Nov 5, 2014. In the prior quarter, the company had reported a positive earnings surprise of 4.00%. Let's see how things are shaping up for this announcement.
Earnings Whispers
Our proven model does not conclusively show that SolarCity is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of $1.09 per share, resulting in an ESP of 0.00%.
Zacks Rank: SolarCity's Zacks Rank #3 when combined with a 0.00% ESP makes a surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings release.
Factors to Consider this Quarter
SolarCity is currently following an aggressive strategy to enhance its solar panel manufacturing capacity. In Sep 2014, the largest rooftop solar power provider in the U.S. announced that it will construct a new solar panel manufacturing factory in Buffalo, NY. SolarCity will invest a total of $5 billion over the next 10 years to construct and operate the facility, while the state of New York will finance $750 million in the project. Once full production is achieved, the factory will be able to meet over one gigawatt of solar capacity annually. In addition, the project will create new jobs in the state.
SolarCity had plans to set up 20 new operations centers in seven states – Arizona, California, Delaware, Maryland, Massachusetts, Nevada and New York. It is scheduled to complete this program in 2014. The expansion is aimed at curtailing operation costs by reducing service as well as installation drive times. This is expected to enable SolarCity to improve its margins and serve customers more efficiently.
The company is currently pursuing multiple growth avenues and marketing ploys to strengthen its presence across the nation. SolarCity announced in Jul 2014 that it has partnered with a leading national homebuilder K. Hovnanian Homes, to provide solar power options for two new communities in Peoria, AZ. Other solar players like First Solar Inc. (FSLR) and Vivint Solar Inc. (VSLR) have also been driving up residential solar installations. As of Jun 30, 2014, the company’s cumulative number of customers jumped around 52% to 141,034 from 92,998 at year-end 2013.
That said, the company has not been able to earn a profit for nine consecutive quarters and its operating expenses have risen significantly mainly due to its expedited expansion programs. In the second quarter 2014, its loss widened year over year owing to an increase in the share count and higher operating expenses.
Another Stock to Consider
Here is a company in the same sector worth considering as our model shows it has the right combination of elements to post an earnings beat this quarter.
SunPower Corp. (SPWR) has an earnings ESP of +4.17% and carries a Zacks Rank #3.
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