Shares of solar company Array Technologies are sinking Wednesday after the company lowered its sales outlook in its third-quarter earnings report late Tuesday. Other solar stocks are falling in sympathy.
For the third quarter ending Sept. 30, Array reported adjusted earnings of 21 cents per share on sales of $350 million. Analysts polled by FactSet were expecting earnings of 14 cents per share on sales of $375 million.
In the same period last year, Array reported adjusted earnings of 19 cents per share on sales of $515 million.
However, the company lowered its full-year revenue outlook to $1.53 billion to $1.58 billion. Analysts were expecting $1.6 billion.
On the stock market today, ARRY stock is down 18% at 14.96 in recent action. The stock was down as much as 21% earlier in the day. That would mark its largest daily percentage drop since May 12, 2021, when it fell 46%, according to Dow Jones Market Data.
Battered Solar Stocks
Array is based in Albuquerque, N.M., and provides solar tracker technology to utility-scale developers. Solar trackers align panels with the sun's movement to optimize output.
The company pinned its cloudy outlook on the broader economic environment.
"As shown by our reduced revenue outlook, we continue to be impacted by short-term project timing challenges that are outside of our control," Array Chief Executive Kevin Hostetler said on the firm's earnings call Tuesday. "For instance, this quarter, we had several projects that experienced delays associated with financing as developers are focused on renegotiating PPA (power purchase agreement) rates to improve project returns in this higher-interest-rate environment."
Shares for solar companies are getting crushed this year, as the market copes with inflation, rate hikes and supply-chain issues. The solar market is expected to be boosted by massive subsidies for solar panels in the U.S. Inflation Reduction Act of 2022. But some developers are waiting for greater clarity on the incentives.
The 25 solar stocks tracked by IBD MarketSmith in the Energy-Solar industry group have already lost a cumulative 46.5% in 2023 as of midday Wednesday. The group is the worst performer among the 197 industry categories tracked by MarketSmith, based on six-month price performance.
Further, the Invesco Solar ETF designed to track the industry is down 41% this year.
In that environment, Array stock had previously stood out as a strong performer. Shares were up about 15% on the year heading into October. But a barrage of bad news and warnings about the industry since then has dragged ARRY stock down to a roughly 24% loss on the year.
ARRY Stock: Recent Slide
Analysts still largely see Array as a worthy stock. The company has 18 buy ratings compared with five hold and zero sell.
JPMorgan maintained an overweight, or buy, rating for ARRY stock following the earnings report. Array serves a utility solar market that has held up better than other markets. Still, the firm lowered its price target for ARRY to 30, from 32.
"We estimate that ARRY has approximately one hundred projects in its current backlog, and while the headlines of project delays have been top-of-mind for renewables investors recently, we note that the vast majority of ARRY's backlog is tracking timing expectations," wrote JPMorgan analyst Mark Strouse.
Truist, meanwhile, maintained a buy rating and 38 price target.
"While shares could face pressure tomorrow on the further guidance reduction/sequential orderbook decrease," analyst Jordan Levy wrote Tuesday night, "we note ARRY continues to exceed our/Street profitability estimates and we'd expect the project timing landscape to improve into 2024, and thus would be buying on any weakness in tomorrow's session."
Other solar stocks fell in sympathy Wednesday. Array's closest competitor, Nextracker, is down 6.3% in recent action. The firm reported earnings that topped expectations on Oct. 25.
The Invesco Solar ETF is down 3% in recent action, following a 1.5% gain in trading Tuesday.
