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Residential solar energy company Sunrun (NASDAQ:RUN) reported results ahead of analysts' expectations in Q2 CY2024, with revenue down 11.2% year on year to $523.9 million. It made a GAAP profit of $0.55 per share, improving from its profit of $0.25 per share in the same quarter last year.
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Sunrun (RUN) Q2 CY2024 Highlights:
- Revenue: $523.9 million vs analyst estimates of $517.7 million (1.2% beat)
- EPS: $0.55 vs analyst estimates of -$0.25 (321% beat)
- Gross Margin (GAAP): 18.1%, up from 8.6% in the same quarter last year
- Adjusted EBITDA Margin: 4.7%, up from -13.4% in the same quarter last year
- Free Cash Flow was -$212.8 million compared to -$139.6 million in the previous quarter
- Customers: 984,000, up from 957,313 in the previous quarter
- Market Capitalization: $3.66 billion
Helping homeowners use solar energy to power their homes, Sunrun (NASDAQ:RUN) provides residential solar electricity, specializing in panel installation and leasing services.
Renewable EnergyRenewable energy companies are buoyed by the secular trend of green energy that is upending traditional power generation. Those who innovate and evolve with this dynamic market can win share while those who continue to rely on legacy technologies can see diminishing demand, which includes headwinds from increasing regulation against “dirty” energy. Additionally, these companies are at the whim of economic cycles, as interest rates can impact the willingness to invest in renewable energy projects.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Thankfully, Sunrun's 19.6% annualized revenue growth over the last five years was incredible. This shows it expanded quickly, a useful starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Sunrun's recent history shows its demand slowed significantly as its annualized revenue growth of 2.7% over the last two years is well below its five-year trend.
Sunrun also reports its number of customers, which reached 984,000 in the latest quarter. Over the last two years, Sunrun's customer base averaged 18.3% year-on-year growth. Because this number is better than its revenue growth, we can see the average customer spent less money each year on the company's products and services.
This quarter, Sunrun's revenue fell 11.2% year on year to $523.9 million but beat Wall Street's estimates by 1.2%. Looking ahead, Wall Street expects sales to grow 14.2% over the next 12 months, an acceleration from this quarter.
Operating MarginUnprofitable industrials companies require extra attention because they could get caught swimming naked if the tide goes out. It's hard to trust that Sunrun can endure a full cycle as its high expenses have contributed to an average operating margin of negative 49% over the last five years. This result isn't too surprising given its low gross margin as a starting point.
Analyzing the trend in its profitability, Sunrun's annual operating margin decreased by 60 percentage points over the last five years. The company's performance was poor no matter how you look at it. It shows operating expenses were rising and it couldn't pass those costs onto its customers.
This quarter, Sunrun generated an operating profit margin of negative 24.4%, up 10.5 percentage points year on year. This increase was solid, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Sunrun's earnings losses deepened over the last five years as its EPS dropped 98.5% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Sunrun's low margin of safety could leave its stock price susceptible to large downswings.
In Q2, Sunrun reported EPS at $0.55, up from $0.25 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Sunrun to improve its earnings losses. Analysts are projecting its EPS of negative $6.37 in the last year to advance to negative $1.06.
Key Takeaways from Sunrun's Q2 ResultsWe were impressed by how significantly Sunrun blew past analysts' EPS expectations this quarter. We were also glad its revenue outperformed Wall Street's estimates. Overall, we think this was a strong quarter that should satisfy shareholders. The stock traded up 9.5% to $18.02 immediately after reporting.
