What Do Analysts Expect from Sunrun’s 1Q16 Earnings?
Sunrun’s gross profit estimates
Sunrun’s (RUN) gross profit for 4Q15 came in at $2.7 million. For 1Q16, analysts expect the company to report a gross profit of $5.7 million. The expected increase in its gross profit is primarily due to the anticipated decrease in its cost per watt installed.
According to a company filing, Sunrun set to double its built business in fiscal 2016. Cost per watt installed of Sunrun’s built business is relatively lower compared to its third-party installation costs. For 4Q15, Sunrun’s built install cost per watt was $2.33 compared to $2.81 cost per watt installed by its third-party partners.
Higher gross profit implies that a higher portion of revenue is retained by the company after accounting for the cost of goods sold. Also, analysts anticipate a marginal increase in gross profit margins to 6.7% compared to 2.7% in 4Q15. Moving ahead, analysts expect that the company will report higher gross profit margins in fiscal 2016.
Operating income
Sunrun (RUN) reported an operating loss of $65 million in 4Q15. For 1Q16, analysts expect Sunrun to report an operating loss of about $59 million. The anticipated decrease is mainly due to higher gross margins from its operations.
The downstream solar industry is a capital-intensive industry. The industry is in its growth phase. The incumbent player spent huge capital upfront to gain market share. However, income is generated from solar leases or power purchase agreements over the span of 15–20 years. As a result, operating losses are common among downstream solar (TAN) companies such as SolarCity (SCTY), Sunrun (RUN), and Vivint Solar (VSLR), as well as the downstream operations of SunPower (SPWR).
Net income
Sunrun (RUN) reported an adjusted net loss of $5.7 million for 4Q15. For 1Q16, analysts expect Sunrun to report a net loss of about $49.6 million. Moving ahead, analysts anticipate an increase in a cumulative net loss during fiscal 2016 compared to fiscal 2015.
In the final part of this series, we’ll discuss the key factors that are important for investors in Sunrun’s 1Q16 earnings.
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