SolarCity (NASDAQ:SCTY) is set to report its fiscal 2014 first-quarter earnings after the market closes on Wednesday, May 7. With shares of SolarCity down more than 2% year to date, this earnings announcement offers the solar energy company an opportunity to regain investor confidence. Let's look at Wall Street's estimates for the quarter and whether or not the company can overdeliver on those projections.
Shining a light on expectations
Wall Street expects earnings to decline at a faster clip in the first quarter, with SolarCity posting a loss of $0.74 per share. That's a 100% decline from its loss of $0.37 per share during the same period a year ago. Nevertheless, analysts expect revenue to grow around 78% to $53.59 million in the quarter, up from just $29.99 million in the year-ago period. While these expectations aren't overly optimistic, investors will want to see improved guidance for solar installations going forward.
SolarCity said it anticipates installations in the range of 78 MW and 82 MW for its fiscal first quarter. If the company is able to top these projections, it could push the stock higher. However, to really crush Wall Street's estimates, SolarCity would need to raise its full-year guidance on installs. Yet, that could be challenging considering the company already projects installing between 475 MW and 525 MW in fiscal 2014.
That's quite ambitious considering SolarCity only deployed 280 MW in fiscal 2013, which was up 78% year over year from just 157 MW in fiscal 2012. As you can see, SolarCity will need to nearly double the number of installations it makes this year if it wants to hit its projected output for the year. This isn't unreasonable, but it will certainly take strong execution on SolarCity's part.
Other areas that investors will want to watch when the company reports tomorrow include margins and overhead costs. SolarCity expects GAAP operating lease and solar energy systems incentive gross margin of between 40%-50% for the first quarter. For comparison, SolarCity generated a gross profit margin of 42% during the first quarter of fiscal 2013. Moving to costs, the company expects GAAP operating expenses of between $70 million and $75 million when it reports Q1 results on Wednesday.
Ultimately, it should be a strong quarter for SolarCity when it reports tomorrow. However, it's not likely that the solar stock will burn past Wall Street's estimates given the lofty expectations that are already on the table. Moreover, the only way investors will see a meaningful spike in SolarCity stock tomorrow would be if it were to raise its full-year outlook. Unfortunately, I don't believe that is likely this early in its fiscal year.
Tamara Rutter has no position in any stocks mentioned. The Motley Fool recommends and owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.