Will SunEdison (SUNE) Miss Earnings Estimates? - Analyst Blog

SunEdison Inc. SUNE is set to report first-quarter 2014 results on May 8. Last quarter, the company posted a negative earnings surprise of 500.0%. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

SunEdison reported dismal fourth-quarter 2013 results. Although revenues increased on a year-over-year basis, higher-than-expected operating expenses were responsible for the disappointing bottom-line performance.

SunEdison has a strong project pipeline and is expected to benefit from the rise in demand for solar energy.  Moreover, its recent partnerships and cost reduction initiatives are expected to expand margins.

Additionally, SunEdison's plan to spin off its semiconductor businesses into a separate entity via an IPO in 2014 will help it to emerge as a pure-play solar project developer and bode well for the future.

Nonetheless, the pricing environment remains a concern for the company. Moreover, SunEdison has a highly leveraged balance sheet. We believe that an increase in the debt level and competition from SunPower Corp SPWR and First Solar Inc. FSLR also remain headwinds.

Earnings Whispers?

Our proven model does not conclusively show that SunEdison will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 21 cents. Hence, the difference is 0.00%.

Zacks Rank: SunEdison has a Zacks Rank #5 (Strong Sell). We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here is another company you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Intuit Inc. INTU, Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).