Earnings Preview: Improved demand might help Vivint Solar’s Q4 earnings

Shares of Vivint Solar (NYSE: VSLR) has jumped 41% this year as the solar market is expected to pick up demand in 2019. The company is scheduled to report its fourth quarter 2018 results on March 5 after the bell. It would be interesting to see whether the residential solar energy producer is able to sustain the stock momentum as it enters the 2019 fiscal year.

For the fourth quarter, analysts are expecting Vivint to report EPS of $0.18 compared to a $0.43 loss reported by the firm last year. Sales is expected to increase by 7.7% to $71.94 million. Last quarter, the solar energy company failed to beat street estimates and the stock was down 8% after the weaker Q3 results.

Vivint is expecting megawatts installed in the fourth quarter to be between 53 to 57 megawatts. For the last reported quarter, the company reported a 16.7% increase with installed megawatts touching 54.3. The cost incurred per watt for the Q4 period is forecasted to be in the range of $3.00 to $3.07. Investors will be keeping a tab on the cost metric very closely in the upcoming quarter.

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In the third quarter, the retained value per watt stood at $2.06. This is one of the key metrics tracked by the street since the increase in installations would result in more value created per watt, which would improve the top line.

Vivint’s stock price jump in 2019 can be attributed to increasing demand and reduction in interest rates. However, one needs to wait and watch till tomorrow to see how the management is providing its outlook, which would give insights to how the company and industry as a whole is going to perform this year.

Tariff Impact

Solar companies’ stock has been volatile throughout 2018 period as the industry was impacted by the trade war between the US and China resulting in lower demand for solar panels. Solar panel manufacturers like First Solar (FSLR), JinkoSolar (JKS), SunPower (SPWR) and Canadian Solar (CSIQ) margins were hurt by dwindling panel prices due to lower demand.

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In addition, Trump administration levied a 30% duty on imported solar cells and panels into the United States. The duty is expected to touch 15% by 2021 with an annual reduction of 5%. Even though there was an impact for solar panel manufacturers, firms like Vivint and Sunrun (RUN) which buy solar panels for deployment benefited from lower prices which resulted in improved margins.

Vivint and Sunrun have been having a dream run in the bourses. In the last 12 months, Vivint’s stock has surged 79%, while Sunrun has seen its stock skyrocketing 129.60%. It’s important for Vivint to improve its headline numbers in the fourth quarter to maintain the stock growth witnessed in the past 18 months.

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