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Solar ETFs Riding High on Upbeat Q2 Earnings

The solar industry, which is under pressure this year due to the supply crunch in global chips and rising panel prices, is shining brightly of late on rounds of upbeat earnings. This is especially true as the pure-play Invesco Solar ETF TAN has gained about 5.4% in a week.

Additionally, the Biden administration is making a big push to support green energy and lower carbon emissions. Its $2.3 trillion infrastructure plan would supercharge an already booming clean-power sector. His plan proposes a 10-year extension of wind and solar tax credits, and new tax credits for batteries and transmission (read: ETFs To Play U.S. Infrastructure Overhaul).

The administration recently rolled out a tool that enables instant permitting of rooftop solar installations, addressing a major source of industry delays and possibly lowering costs for homeowners. This software will help expedite the adoption of rooftop solar and achieve President Joe Biden's goal of decarbonizing the U.S. electricity grid by 2035, a key pillar of his plan to address climate change.

Further, the rising demand for a broad range of solar products such as solar-powered generators, portable smartphone chargers, outdoor motion sensor lights, backpacks, and cookers bodes well for the industry (read: Time for Clean Energy ETFs?).

Other than this, a slew of better-than-expected earnings has added to the industry’s strength.

TAN in Focus

This ETF offers global exposure to the solar industry by tracking the MAC Global Solar Energy Index, holding 56 stocks in the basket. It is moderately concentrated on components with each making up for not more than 12.1% of the assets. American firms dominate with 48.5% of the fund’s portfolio, followed by China (22%) and Spain (6.2%). The product has amassed $3.3 billion in its asset base and trades in a solid volume of around 1.4 million shares a day. It charges investors 69 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

We have highlighted earnings of some stocks that are among the top 10 holdings in TAN. Let’s take a look at the individual quarterly reports:

Solar Earnings in Focus

Enphase Energy ENPH reported better-than-expected earnings. Adjusted earnings of 53 cents per share surpassed the Zacks Consensus Estimate of 42 cents and increased 211.8% from the year-ago earnings of 17 cents. Revenues soared 151.7% year over year to $316.1 million and edged past the consensus mark of $314 million. The company takes the top spot, accounting for a 12.1% share in the fund’s basket.

SolarEdge Technologies SEDG also reported robust results. It posted earnings of $1.28 per share, outpacing the Zacks Consensus Estimate of $1.12 and improving 32% from the year-ago earnings. Revenues jumped 44.7% year over year to $480.1 million and came well ahead of the consensus mark of $457 million. SolarEdge takes the second spot with 10.7% allocation (see: all the Alternative Energy ETFs).

First Solar FSLR topped on the bottom line while lagged on revenues. Earnings per share of 77 cents beat the Zacks Consensus Estimate by 17 cents and improved 120% from the year-ago earnings. Revenues slid 2.1% year over year to $629.2 million and fell short of the estimate of $632 million. The stock occupies the fifth position with 6.4% of assets.


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First Solar, Inc. (FSLR): Free Stock Analysis Report
 
Enphase Energy, Inc. (ENPH): Free Stock Analysis Report
 
Invesco Solar ETF (TAN): ETF Research Reports
 
SolarEdge Technologies, Inc. (SEDG): Free Stock Analysis Report
 
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