SolarEdge stock shines after exceeding earnings in the second quarter

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    Shares in SolarEdge technologies (NASDAQ: SEDG) shine brightly after the company announced second quarter results on Monday evening.

    The results far exceeded market expectations and the solar inverter specialist offered investors a rosy outlook for the next quarter despite ongoing challenges in the supply chain.

    At 12:30 p.m. EDT, SolarEdge stock was up 15%.

    Dealing with a challenging supply chain situation

    Revenue rose 18% to $ 480.1 million in the second quarter, well above the consensus estimate of $ 455.7 million in revenue. Revenue from the core Solar segment was $ 431.5 million, which is 90% of total revenue.

    During the quarter, SolarEdge shipped approximately 5 million power optimizers and 180,000 inverters.

    The non-solar business had sales of $ 49 million, mainly due to the growing production of drive units and batteries for Stellantis (NYSE: STLA) subsidiary Fiat and its light commercial vehicle e-Ducato.

    SolarEdge won this contract earlier this year as the Italian automaker plans to electrify 60% of its vehicle range by the end of 2021.

    “We look forward to closing the second quarter of 2021 with record sales in both our solar and non-solar businesses and with continued strong demand for our products in the various regions and segments,” commented CEO Zvi Lando in an explanation. “We navigate successfully through the challenging supply chain environment while supporting the growth and expansion of our customers with new and existing products.”

    Nearly every industry is affected by the global chip shortage, and the solar industry is no exception. SolarEdge copes with the difficult logistics environment by implementing a multi-source strategy.

    For example, a manufacturing partner’s facility in Vietnam is currently at reduced capacity due to the pandemic, but SolarEdge has been able to increase production at other factories in China, Hungary and Israel. This can lead to higher customs duties and freight costs.

    Adjusted net income was $ 72.5 million, or $ 1.28 per share. Investors were expecting just $ 1.11 per share in adjusted earnings.

    A bright outlook

    The guidance for the third quarter was also strong, with revenue forecast in the range of $ 520 million to $ 540 million. Analysts currently expect sales of 503.4 million US dollars. Revenue for the solar segment is expected to be between $ 460 million and $ 480 million of that. The adjusted gross margin should be 32 to 34%.

    SolarEdge expects to ship 25 megawatt hours (MWh) to 30 MWh of batteries in the third quarter as the company ramped up production. To meet the growing demand for battery storage in residential complexes, SolarEdge has signed a supply contract with Samsung for 1 gigawatt hour (GWh) of cells in 2022.

    On the conference call with analysts, Lando noted that SolarEdge has now seen strong growth in its household products for three consecutive quarters.

    The company will pass on part of the increased freight costs to customers in the form of moderate price increases in the third quarter.

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    Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends SolarEdge Technologies. Millennial Money is part of The Motley Fool Network. Millennial Money has a disclosure policy.

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