Sunrun’s third-quarter results have widely outperformed analysts’ consensus forecasts, with earnings catapulting 772% year-on-year. In its report, the company showed a focus on expanding its market reach, with upcoming projects in Puerto Rico and a South Korean collaboration.
- Sunrun’s Q3 earnings beat expectations, showing growth in revenue
- Despite a difficult macro environment that has favoured oil and gas in the past three months, Sunrun has benefited from strong demand in clean energy
- The biggest holder of the company’s stock is the iShares Core S&P Mid-Cap ETF, which is flat in the year to date
Shares in US residential solar panel company Sunrun [RUN] soared after reporting its latest earnings results on 2 November, which showed resilience against growing inflationary pressures.
Sunrun delivered better-than-expected results for Q3 2022. Revenue came in at $631.9m, up 44% from $438.8m for the same period in 2021. Earnings per share of $0.96 were up a massive 772.7% year-over-year from $0.11, outpacing the $0.09 consensus loss estimated by 17 Financial Times analysts. It also marked a significant difference from an EPS loss of $0.06 in the previous quarter, when it beat analyst expectations of -$0.14.
Shares in the San Francisco-based company climbed as high as 7% in after-hours trading following the positive results before closing up 19.3% the next day. Despite the post-earnings rally, Sunrun’s stock has fallen 24.6% year-to-date and 9.2% in the past month as of 3 November. The stock is trading 57.3% below the 52-week-high of $60.60 it reached almost one year ago on 8 November 2021.
Sunrun’s top-line Q3 figures were boosted by a robust customer base and an increase in installations. The company’s partnership with Ford [F] is thought to have benefited its performance.
Sunrun had networked solar energy capacity of 5.4 gigawatts in the three months to the end of September. In the same period, its customer base hit 759,937, with 639,748 of them being subscribers. It saw new customer installations grow by 17%, while Customer agreements and incentives revenue rose by the same percentage to $271.2m.
The company noted it had demonstrated its value when 17,000 of its customers returned more than 1GWh of energy to California’s energy grid, when it faced the threat of blackouts throughout the entire first week of September.
Other wins in Q3 included Sunrun’s contract to build Puerto Rica’s first virtual power plant. Meanwhile, its Lunar Energy subsidiary, co-founded with South Korean SK Group in 2020, will help customers share energy within their respective communities.
Sunrun said that it ended the quarter with $5.1bn of net earning assets, including $956m in cash.
Expanding US market penetration
The US Inflation Reduction Act or ‘Climate Bill’ is regarded as a major boost for the solar industry, with tax incentives promoting a switch to clean energy sources as part of an effort to decarbonise the US by 2035.
The Russia-Ukraine war has also highlighted the urgency to find alternative sources for energy, with concerns over future supplies of natural gas in Europe.
Though the sector has been scarred by macroeconomic headwinds including rising costs and supply-chain issues, there remains huge potential for growth. Only 4% of eligible US households have solar power, with the US residential electricity market worth $194bn annually. So far, Sunrun has installed 47,000 solar and battery systems nationwide.
Danny Abajian, CFO of Sunrun, said: “The actions we took throughout the year to respond to higher interest rates and material costs have resulted in strong improvements in our net subscriber value, which exceeded our prior guidance, even excluding the benefit from the passage of the Inflation Reduction Act.”
Funds in focus: iShares Core S&P Mid-Cap ETF
A total of 34.6 million Sunrun shares are held across 117 US-traded ETFs. The biggest holder of Sunrun’s stock, with a total 6.17 million shares, is the iShares Core S&P Mid-Cap ETF [IJH]. The company has a 0.23% weighting in the fund, which is down 15.5% year-to-date but up 7.8% over the past month.
Sunrun is also in the top 10 holdings of the ALPS Clean Energy ETF [ACES] and Global X Solar ETF [RAYS], with weightings of 4.03% and 2.71%, respectively. The former is down 17.9% year-to-date and 7.5% over the past month, while the latter fund is down 13.3% for the year so far, and 1.4% over the past month.
The Invesco Solar ETF [TAN] has the smallest position in Sunrun, with a weighting of 3.80%, making it the fund’s sixth largest holding. The fund is 9.1% down in the year-to-date, and 7.2% over the past month.
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