TerraForm Power Inc. TERP is scheduled to report second-quarter 2015 results on Aug 6. Last quarter, the company posted loss per share of 31 cents, comparing unfavorably with the Zacks Consensus Estimate of earnings of 2 cents.
Let us see how things are shaping up for this announcement.
Factors to Consider
TerraForm Power is a YieldCo of SunEdison Inc. SUNE. A YieldCo is a publicly traded company formed to own operating assets that produce cash flow, which is then distributed to investors through dividends. This model enables the segregation of assets related to stable operating cash flows, and is therefore more attractive for investors. It is a safer and cheaper way to finance growth and meet the rising demand for solar power.
We believe that TerraForm Power will benefit from the rise in demand for solar energy. The company, along with SunEdison, has been expanding clean energy capabilities through various alliances and acquisitions, which should drive growth in the second quarter and beyond.
The demand for clean energy will increase manifold over the long term. Therefore, we believe that TerraForm Power and SunEdison are well positioned to capitalize on this opportunity.
However, as project development requires considerable time and investment, any delay or inability in selling the projects at desired prices could affect the company’s financial performance.
Earnings Whispers
Our proven model does not conclusively show that TerraForm Power will 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. That is not the case here as you will see below.
Zacks ESP: Earnings ESP of TerraForm Power is +34.78% as the Most Accurate estimate of 31 cents is higher than the Zacks Consensus Estimate of 23 cents.
Zacks Rank: TerraForm Power currently has a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
2U Inc. TWOU, with an Earnings ESP of +3.57% and a Zacks Rank #3.
Vivint Solar, Inc. VSLR, with an Earnings ESP of +1.52% and a Zacks Rank #3.
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