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Will SolarCity (SCTY) Beat Expectations in Q4 Earnings?

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Solar major SolarCity Corp.SCTY is set to release fourth-quarter 2015 results after the market close on Feb 9. In the preceding quarter, the company delivered a negative earnings surprise of 5.53%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that SolarCity is likely to beat estimates this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to beat estimates, and SolarCity has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.17%. This is because the Most Accurate estimate is at a loss of $2.54 while the Zacks Consensus Estimate is pegged lower at a loss of $2.57. This is a meaningful indicator of a likely positive surprise.

Zacks Rank: SolarCity currently carries a Zacks Rank #3.

The company's Zacks Rank #3 and positive ESP make us reasonably confident of a beat this season.

Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating estimates. Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

What is driving the Better-than-Expected Results?

SolarCity expects Q4 bookings to be larger than Q3 and installations to grow 58−69% to about 280−300 megawatt (MW) in the fourth quarter. The company on its third quarter earnings call projected 2015 installations of 878−898 MW, down from its earlier forecast of as much as 1,000 MW. This is mainly because weather conditions might have slowed work, especially on commercial rooftops in the U.S. Northeast.

It is important to note that SolarCity had rapidly expanded its business and won customers before the planned federal tax credit cut in 2017. The 30% tax credit for solar systems on residential and commercial properties was slated to drop to 10% in 2017. Although in Dec 2015 legislation enabled solar power companies to keep claiming federal investment tax credits ("ITC") at 30% of the price of solar energy systems installed by businesses or homeowners till 2019, the money that has already been invested in its business is currently weighing on SolarCity's bottom line.

The company had earlier revealed that its operating expenses will likely fall in between $245 million to $260 million and the non-GAAP loss is expected to be in the range of $2.60 to $2.75 per share (wider than $1.33 in the year-ago quarter). Total revenues are expected to be within $100 million to $108 million compared with $71.8 million in the year-ago quarter.

This California-based solar major continues to pursue multiple growth ventures and marketing ploys to strengthen its presence across the nation. During the quarter, SolarCity manufactured the world's most efficient rooftop solar panel, with a module efficiency of 22.04%, as measured by Renewable Energy Test Center.

Other Solar Release s

JinkoSolar Holding Co., Ltd. JKS has an earnings ESP of +5.22% and carries a Zacks Rank #3. The company is expected to report fourth quarter 2015 results on Mar 7, 2016.

SunPower Corporation SPWR is scheduled to report fourth quarter results on Feb 17. The company holds a Zacks Rank #3.

8point3 Energy Partners LP CAFD , which began trading on Jun 19, 2015, reported a loss of $8.6 million for the fourth quarter of fiscal 2015 (ending Nov 30, 2015), much wider than the prior-year loss of $2.2 million.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

JINKOSOLAR HLDG (JKS): Free Stock Analysis Report

SOLARCITY CORP (SCTY): Free Stock Analysis Report

SUNPOWER CORP-A (SPWR): Free Stock Analysis Report

8POINT3 ENERGY (CAFD): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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