TLDR
- SolarEdge Technologies reported a Q3 loss of $0.31 per share, beating analyst expectations of a $0.38 loss and showing improvement from the prior year’s $15.33 loss per share.
- Revenue reached $340.18 million, up 30% from the year-ago quarter and exceeding consensus estimates by 2%, marking the fourth consecutive quarter of revenue beats.
- Gross margin improved to 21.2% from 11.1% in the previous quarter, though tariffs negatively impacted margins by approximately 2%.
- Q4 revenue guidance of $310-$340 million disappointed investors, falling short of the $343.3 million consensus estimate, causing shares to drop 10.4%.
- The company generated positive free cash flow of $22.8 million in Q3, reversing from negative $9.1 million in the prior quarter.
SolarEdge Technologies posted better-than-expected third quarter results on Wednesday. But investors weren’t interested in looking backward.
The company reported an adjusted loss of $0.31 per share for Q3. Analysts had expected a loss of $0.38 per share. That marked an 18.42% earnings surprise.
The photovoltaic products maker brought in revenue of $340.18 million. That topped the Zacks Consensus Estimate by 2.02%. Revenue jumped 30% from $260.9 million in the year-ago quarter.
This was the fourth straight quarter SolarEdge beat revenue estimates. The company also surpassed earnings expectations for the third time in the last four quarters.
Margins Show Real Progress
The gross margin picture looked encouraging. It improved to 21.2% from 11.1% in the previous quarter.
Non-GAAP gross margin came in at 18.8% compared to 13.1% in Q2. Tariffs took a bite out of margins, hurting them by roughly 2%.
Sequential revenue growth reached 18% from the prior quarter’s $289.41 million. That continued a pattern of steady improvement.
CEO Shuki Nir pointed to the turnaround momentum. The company has now posted three consecutive quarters of revenue growth.
The cash flow situation turned positive too. SolarEdge generated $22.8 million in free cash flow during Q3. That reversed from negative $9.1 million in the prior quarter.
Operating activities produced $25.6 million in cash. The previous quarter had used $7.8 million.
The company shipped approximately 92,700 inverters during the quarter. It also moved 2.95 million optimizers and 230 MWh of batteries for solar applications.
Why Shares Dropped
Here’s where things got messy. SolarEdge guided Q4 revenue between $310 million and $340 million.
Analysts wanted $343.3 million. That miss sent shares down 10.4% on Wednesday.
The stock had been on a tear this year. Shares climbed 134% since January versus the S&P 500’s 15.1% gain.
The Zacks Rank system currently rates SolarEdge as a Hold. That suggests the stock should perform in line with the market near term.
For the current fiscal year, analysts expect a loss of $2.88 per share on revenue of $1.16 billion. Next quarter’s consensus calls for a loss of $0.30 per share on $328.56 million in revenue.
The Solar industry ranks in the top 29% of the 250-plus Zacks industries. Research shows the top 50% of Zacks-ranked industries outperform the bottom half by more than 2 to 1.
FTC Solar, another company in the sector, reports Q3 results on November 12. Analysts expect a loss of $0.50 per share on revenue of $21.3 million.
SolarEdge’s estimate revisions have been mixed heading into this earnings release. The direction could shift based on management’s commentary from the earnings call.
The company’s Q3 loss of $0.31 per share compared to a loss of $15.33 per share in the same quarter last year. A quarter ago, analysts expected a loss of $0.82 per share but the company posted a loss of $0.81.
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