Sustainable Investment Under Trump: 'Performance Matters Far More Than Politics,' JPMorgan Analyst Says

Eni S.p.A E, a global integrated energy company, is set to receive a new chunk of investment for its renewable energy business, Plenitude. The Swiss asset management firm Energy Infrastructure Partners (“EIP”) will increase its stake in Plenitude from 7.6% to 10%. The deal values Eni’s renewable energy and retail business unit, Plenitude,at more than 10 billion euros, including debt.

Eni has stated that EIP will purchase new shares issued by the company for approximately 209 million euros. E has adopted a new “satellite” strategy, wherein it will set up separate business units that are capable of drawing investor attention. The new investments will be utilized to grow the businesses further. The deal with EIP aligns with Eni’s satellite strategy.

E believes that this strategy is an ideal path toward energy transition. Eni plans to build low and zero-carbon businesses that can capture the attention of leading investors and grow organically to become sustainable on their own. Eni has also implemented this strategy on a previous deal involving KKR, a U.S.-based investment firm, that purchased a 25% stake in Enilive, its biofuel business unit. Furthermore, Eni is reportedly talking to several potential investors and seeking partners for its carbon capture and storage business.

EIP mentioned that increasing its stake in Plenitude underscores its confidence in the business.

E’s Zacks Rank and Key Picks

Currently, E carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Archrock Inc. AROC, Smart Sand, Inc. SND and FuelCell Energy FCEL. Archrock and Smart Sand presently sport a Zacks Rank #1 (Strong Buy) each, while FuelCell Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

Smart Sand, Inc. is a low-cost producer of high-quality Northern White frac sand, an ideal proppant for hydraulic fracturing and various industrial applications. The company provides proppant and other logistics services for several companies in the oil and gas industry. With sustained demand in the oil and gas market, the company is expected to see growing demand for its services, supporting a positive outlook.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

Zacks Investment Research

Luminar Technologies, Inc. (LAZR) came out with a quarterly loss of $0.16 per share versus the Zacks Consensus Estimate of a loss of $0.19. This compares to loss of $0.21 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 15.79%. A quarter ago, it was expected that this company would post a loss of $0.20 per share when it actually produced a loss of $0.18, delivering a surprise of 10%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Luminar Technologies, which belongs to the Zacks Automotive - Original Equipment industry, posted revenues of $15.49 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 15.85%. This compares to year-ago revenues of $16.96 million. The company has not been able to beat consensus revenue estimates over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Luminar Technologies shares have lost about 73.9% since the beginning of the year versus the S&P 500's gain of 25.7%.

What's Next for Luminar Technologies?

While Luminar Technologies has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Luminar Technologies: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is -$0.11 on $25.29 million in revenues for the coming quarter and -$0.64 on $80.85 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Automotive - Original Equipment is currently in the bottom 30% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

ChargePoint Holdings, Inc. (CHPT), another stock in the same industry, has yet to report results for the quarter ended October 2024.

This company is expected to post quarterly loss of $0.09 per share in its upcoming report, which represents a year-over-year change of +69%. The consensus EPS estimate for the quarter has been revised 2.2% lower over the last 30 days to the current level.

ChargePoint Holdings, Inc.'s revenues are expected to be $89.68 million, down 18.7% from the year-ago quarter.

Zacks Investment Research

When Kamala Harris lost the 2024 U.S. election last week, these ten large-cap stocks were the worst performers.

• Moderna, Inc. shares dipped 12.53% last week despite a third-quarter earnings beat due to a weak vaccine demand slowdown. Several analysts lowered their price forecast on the stock.
• Honda Motor Company, Ltd. stock tumbled 11.46% on a decline in the first-half profit and reduced annual profit forecast.
• Akamai Technologies, Inc. shares declined 10.67% after the company revised its FY24 guidance.
• Advanced Drainage Systems, Inc. stock fell 10.53% after it reported worse-than-expected second-quarter results and cut its FY25 net sales outlook.
• AstraZeneca PLC shares decreased 9.72% following a report suggesting that the company’s insurance fraud involved senior executives in China.
• Pinterest, Inc. stock was down 9.60% after the company reported third-quarter results, and several analysts cut the price forecast on the stock.
• MercadoLibre, Inc. shares fell 9.29% after it reported third-quarter financial results.
• First Solar, Inc. stock declined 8.64%, probably due to Donald Trump’s presidential election victory. Investors may be assessing Trump’s policies regarding solar and renewable energy.
• POSCO HOLDINGS INC. shares were down 8.42%.
• Floor & Decor Holdings, Inc. stock fell 8.22%.

Also Read:

• Donald Trump Victory Week (Nov 4-8): These Large Cap Stocks Were Biggest Gainers

Image via Shutterstock

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Exxon Mobil Corporation XOM, the oil and gas supermajor, has concluded the purchase of a floating production, storage, and offloading (FPSO) vessel from SBM Offshore. The FPSO Prosperity, working for ExxonMobil’s Payara field offshore Guyana, was acquired through the transaction.

While ExxonMobil has gained ownership of the vessel, SBM Offshore is responsible for its operations and maintenance activities. The transaction involves a total consideration of $1.23 billion in cash. The transaction was closed before the maximum lease term of the FPSO expired. The lease is set to expire in November 2025.

SBM Offshore has mentioned that the FPSO unit has been on hire since November 2023. It began production at XOM’s Payara field starting Nov. 14, 2023. The Payara development was the third oil project being developed in the prolific Starbroek Block offshore Guyana. SBM Offshore will carry out operations and maintenance for FPSO Prosperity until 2033 under an integrated operations and maintenance model. This approach is aimed at leveraging the extensive knowledge and experience of both SBM Offshore and ExxonMobil to manage the FPSO’s operations.

The net cash proceeds from the deal will be primarily used to repay project financing worth $0.9 billion. The FPSO Prosperity is one of the first vessels of its kind to have received the SUSTAIN-1 notation from the American Bureau of Shipping. This recognizes the vessel’s sustainability in terms of its design, operational excellence and documentation procedures.

XOM’s Zacks Rank and Key Picks

Currently, XOM carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Archrock Inc. AROC, The Williams Companies, Inc. WMB and FuelCell Energy FCEL. Archrock presently sports a Zacks Rank #1 (Strong Buy), while The Williams Companies and FuelCell Energy carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

The Williams Companies is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing, and transporting natural gas and natural gas liquids. Boasting a widespread pipeline system of more than 33,000 miles, Williams is one of the largest domestic transporters of natural gas by volume.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

Zacks Investment Research

Plug Power Inc. PLUG is scheduled to release third-quarter 2024 results on Nov. 12, before market open.

The company has a bleak earnings surprise history, having missed the Zacks Consensus Estimate in each of the preceding four quarters. The negative earnings surprise was 48.1%, on average.

Let’s see how things have shaped up for Plug Power this earnings season.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Factors to Note Ahead of PLUG’s Results

Weak demand for the company’s GenDrive units, electrolyzers and hydrogen infrastructure is expected to have hurt revenues from the sales of equipment, related infrastructure and others. Also, lower sales of cryogenic storage equipment and liquefiers and fuel cell systems are expected to have been spoilsport. The Zacks Consensus Estimate for net revenues from the sale of equipment, related infrastructure and others is $145 million, flat with the prior-year quarter.

However, revenues from fuel delivered to customers and related equipment are expected to have grown due to an increase in the number of sites with fuel contracts. The Zacks Consensus Estimate for fuel delivered to customers and related equipment net revenues is pegged at $20.9 million, implying a 7.7% increase from the year-ago number.

Revenues from Power Purchase Agreements (PPA) are expected to have been buoyed by an increase in the average number of units and customer sites party to these agreements.

Plug Power’s third-quarter results are also expected to benefit from the acquisitions of Applied Cryo Technologies and Frames Group, which strengthened its green hydrogen ecosystem and enhanced its capabilities to deliver a range of turnkey electrolyzer solutions.

It’s worth noting that escalating costs of sales and operating expenses have been concerns for Plug Power for some time now. The impacts of high labor and raw material costs are likely to have affected its margin and profitability. Also, investments associated with product development and growth initiatives are expected to have hurt the company’s performance.

Owing to its extensive regional presence, risks arising from unfavorable movements in foreign currencies and geopolitical issues are likely to have hurt Plug Power’s performance.

Amid this backdrop, the Zacks Consensus Estimate for the company’s third-quarter revenues is pegged at $208 million, indicating a decrease of 4.5% from the year-ago quarter’s figure. The consensus estimate for adjusted earnings is pinned at a loss of 24 cents per share compared with a loss of 47 cents per share in the year-ago quarter.

Plug Power, Inc. Price and EPS Surprise

Plug Power, Inc. price-eps-surprise | Plug Power, Inc. Quote

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for PLUG this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here, as elaborated below.

Earnings ESP: PLUG has an Earnings ESP of -3.69% as the Most Accurate Estimate is pegged at a loss of 25 cents per share, which is wider than the Zacks Consensus Estimate of a loss of 24 cents per share. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: PLUG presently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Industrial Companies

Avery Dennison Corporation AVY delivered third-quarter adjusted earnings of $2.33 per share, which beat the Zacks Consensus Estimate of $2.32. The bottom line increased 9% year over year, driven by higher volume and productivity gains.

Total revenues grew 4.1% year over year to $2.18 billion and missed the Zacks Consensus Estimate of $2.2 billion.

John Bean Technologies Corporation JBT reported adjusted earnings of $1.50 per share in third-quarter 2024, 35.1% higher than the prior-year quarter. The figure beat the consensus estimate of $1.41.

Revenues of $454 million increased 12.4% from the year-ago quarter. The top line surpassed the consensus estimate of $445 million.

A. O. Smith Corporation’s AOS third-quarter adjusted earnings of 82 cents per share matched the Zacks Consensus Estimate. The bottom line decreased 8.9% on a year-over-year basis.

Net sales of $902.6 million missed the consensus estimate of $913 million. The top line decreased 4% year over year due to lower sales in China and decreased volumes of water heaters in North America.

Zacks Investment Research

With Donald Trump now president-elect and Republicans likely to control Congress, clean energy stocks are taking a beating.

The Invesco Solar ETF dropped over 9% last week, dragging it to levels last seen in July 2020. From its January 2021 peak, the TAN ETF is now down more than 70%.

Renewables have also been rattled. The Invesco Global Clean Energy ETF slid over 5% to hit lows not seen since April 2020.

Sunnova Energy International Inc. saw its stock plummet by 45% last week, marking its worst week since its IPO in July 2019. Similarly, SolarEdge Technologies Inc. dropped 23%, reaching all-time lows.

First Solar Inc. has fallen to a valuation of just 10 times forward earnings—its cheapest in over four years.

Is this a buying opportunity at depressed valuations, or is the worst yet to come?

Trump's Anti-Green Policy Stance

"We expect rhetoric regarding environmental policy and the sustainability of the [Inflation Reduction Act] to be elevated, which could likely lead to continued volatility in stocks in the Green Capex supply chain, particularly pure-play solar/wind stocks," Goldman Sachs analyst Brian Singer explained in a note Friday.

Expect the incoming Trump administration to prioritize easing tailpipe emission regulations and increase resource development on federal land.

One of the biggest questions for investors is the future of the Inflation Reduction Act (IRA), which has provided significant tax incentives for solar, wind, and other renewable energy projects.

While Trump and the GOP have expressed skepticism about green subsidies, Goldman Sachs analysts still indicated the IRA could survive in some form due to its broad economic impact.

Goldman Sachs' Singer highlighted that “the job creation, reshoring, and/or environmental benefits of IRA tax incentives could limit policymakers’ interest in making material incentive revisions.” Despite Republican opposition, the IRA's solar and wind tax credits have been economically beneficial across various regions, creating a sticking point for politicians wary of hurting local economies.

Potential scenarios for the IRA under Trump include:

• Full Repeal: This would be the most drastic outcome, likely causing significant disruption in the green energy sector.
• Reversion to Pre-IRA Incentives: In this scenario, incentives would roll back to pre-IRA levels, which could still allow some projects to proceed, albeit at a higher cost.
• Early Termination: A more moderate approach, setting an earlier end date for current incentives.

Green Energy vs. Energy Alternatives: A Cost Battle

Goldman Sachs’ analysis suggests that even without IRA support, solar and wind power could remain cost-competitive with natural gas, though with a slight “Green Premium.”

This means the green sector may stay resilient, but some renewable firms could see a dip in earnings as they adjust to potential shifts in federal support.

A Bright Spot: Big Tech And Rising Power Demand

Global data center power demand is expected to skyrocket by 165% by 2030.

Tech giants like Alphabet Inc. and Amazon.com Inc. have expressed support for low-carbon energy solutions, a trend that may buffer the renewable sector against policy headwinds.

Goldman's utilities team projects a 2.4% CAGR in U.S. power demand through 2030, the highest growth rate since the 1990s.

Despite potential policy turbulence, there's a shift underway in the world of ESG investing. “We have observed a back-to-basics move in the direction of pragmatism,” says Goldman Sachs, noting that investors are increasingly focused on "materiality-driven links to fundamentals and performance."

This approach could make sustainable investing less vulnerable to political shifts. Asset managers may seek clearer connections between ESG factors and financial returns.

Should You Buy the Dip in Solar Stocks?

For investors, the question is whether solar stocks are oversold or if more pain lies ahead.

Companies like First Solar are trading at four-year low valuations and almost single-digit price-to-earnings. Some traders might see an opportunity for long-term gains.

The decision boils down to one's risk tolerance and belief in the resilience of the green energy theme.

Buy now, and you might secure a piece of a sector that's critical to the future. Wait, and you may miss out on a potential recovery rally—assuming Trump's policies don't squeeze renewables into oblivion.

Yet, one thing seems assured: The path forward for this sector will likely be volatile under the new administration.

Now Read:

• Trump’s Deregulation Agenda: Oil & Gas, Defense, And Finance Stocks May Benefit From Loose Rules, Goldman Sachs Says

Image: Midjourney

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.