On Friday, BMO Capital Markets adjusted its outlook on Array Technologies (NASDAQ:ARRY), a leading solar technology company. The firm reduced its price target on the company's shares to $8.00, down from the previous $9.00, while maintaining a Market Perform rating. The revision followed Array Technologies' third-quarter earnings call, which presented a mixed view of the company’s current position and future prospects.
During the earnings call, Array Technologies' management indicated that their current $2 billion backlog is expected to cover approximately $1.3 billion of the forecasted revenue for the fiscal year 2025. This projection suggests potential upside to the analyst's and consensus estimates for that year. However, the company's near-term outlook was less optimistic due to ongoing project delays, particularly in Brazil, leading to a reduction in the upper range of the revenue guidance for the fiscal year 2024.
The company also faced operational challenges, as highlighted by one-time operating expense items. These challenges have necessitated a downward revision of the earnings before interest, taxes, depreciation, and amortization (EBITDA) and earnings per share (EPS) guidance for the fiscal year 2024. The third-quarter bookings, valued at $230 million, also raised concerns about potential market share losses in the United States to competitors such as NXT.
The analyst's comments reflected a balanced view of Array Technologies' performance and potential, acknowledging both the positive aspects of the company's future revenue coverage and the negative impacts of project delays and increased competition. Despite these challenges, the Market Perform rating suggests a neutral stance on the stock's short-term performance prospects.
In other recent news, Array Technologies, a prominent player in solar tracking solutions, reported mixed financial results in its Q3 2024 earnings call. The company announced revenues of $231 million, marking a decline from the previous year, but still within the upper guidance range. Despite a net loss, primarily due to a noncash goodwill impairment charge, the company maintained a robust adjusted gross margin of 35.4% and a stable $2 billion order book.
The company also introduced new products, including a 77-degree tracker and SkyLink architecture, and expects strong double-digit growth in 2025. This optimistic outlook is backed by product innovations and a favorable regulatory environment, with anticipated support from final 45X tax credits. Array Technologies is also targeting 100% domestic content capability by the first half of 2025.
However, it's important to note that Q3 2024 revenues declined by 34% year-over-year and operating expenses increased, largely due to a $162 million noncash goodwill impairment charge from the 2022 STI acquisition. Despite these challenges, Array Technologies remains confident in its growth trajectory, bolstered by strategic customer engagement, a robust order book, and innovative product offerings.
InvestingPro Insights
Array Technologies' recent market performance and financial metrics offer additional context to BMO Capital Markets' analysis. According to InvestingPro data, the company's stock has experienced significant declines, with a 31.03% drop over the last three months and a 58.69% fall over the past year. This aligns with the analyst's cautious stance and reduced price target.
The company's financial health presents a mixed picture. While Array Technologies operates with a moderate level of debt and its liquid assets exceed short-term obligations, it has not been profitable over the last twelve months. This is reflected in the negative return on assets of -5.64%. However, an InvestingPro Tip suggests that analysts anticipate the company will be profitable this year, which could provide some optimism for investors.
Another InvestingPro Tip indicates that 8 analysts have revised their earnings downwards for the upcoming period, which corroborates the concerns raised in the BMO Capital Markets report about project delays and operational challenges.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Array Technologies, providing a deeper understanding of the company's financial position and market outlook.
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