SunEdison Inc. SUNE is expected to report the third-quarter 2015 results on Nov 4. Notably, the company posted wider-than-expected loss in the last quarter.
Let us see how things are shaping up for this announcement.
Factors to Consider
In an effort to strengthen its position as a renewable energy developer, SunEdison has been on an acquisition spree over the last year. These moves, once believed to be strategic, are now being considered ineffective as SunEdison does not have the financial strength to fund the projects. The acquisitions have taken a toll on the company’s balance sheet with total outstanding debt nearly doubling to $10.7 billion at the end of second-quarter 2015 from $5.4 billion a year ago.
This resulted in a massive increase in interest expenses. In the first half of 2015, the company spent $302 million on interest expenses compared with $160 million in the comparable year-ago period. Apart from this, the company has been incurring losses from the semiconductor business and higher operating expenses.
Due to increased costs, the company posted adjusted loss of $216 million or 74 cents per share in the second quarter. In the first quarter, the company incurred non-GAAP net loss of $64.2 million or 25 cents. We expect these factors to continue to hurt SunEdison’s third-quarter results.
Earnings Whispers
Our proven model does not conclusively show that SunEdison will beat earnings this quarter. This 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 for SunEdison is -11.29%. This is because the Most Accurate estimate stands at a loss of 69 cents per share which is wider than the Zacks Consensus Estimate of a loss of 62 cents.
Zacks Rank: SunEdison’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
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.
Other Stocks to Consider
Here are some other stocks 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:
Facebook Inc. FB, with an Earnings ESP of +5.71% and a Zacks Rank #1.
CyberArk Software Ltd. CYBR, with an Earnings ESP of +10.00% and a Zacks Rank #2.
CDW Corp. CDW, with an Earnings ESP of +2.63% and a Zacks Rank #2.
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