Nextracker Stock Jumps on Earnings Beat. There’s More Behind the Move.

Nextracker, the maker of solar-tracking software, posted solid fiscal second-quarter earnings and announced a joint venture in Saudi Arabia. (Ben Stansall /AFP via Getty Images)

Key Points

• Nextracker reported quarterly earnings of 97 cents a share, exceeding analysts’ forecasts. Revenue rises 42%.
• Nextracker forms a joint venture, Nextracker Arabia, with Saudi Arabia’s Abunayyan Holding to manufacture solar tracking technology.
• The company boosts its fiscal-year revenue guidance to $3.28 billion-$3.48 billion and narrowed earnings guidance to $3.26-$3.46 per share.

Nextracker stock jumped on Friday after the solar software company reported better-than-expected quarterly earnings, hiked part of its guidance, and unveiled a new joint venture in the Middle East.

The maker of sun-tracking systems for solar panels said it had entered into an agreement with Saudi Arabia’s Abunayyan Holding to form a joint venture called Nextracker Arabia.

The Riyadh-based company will manufacture solar tracking technology for large-scale projects across the Middle East and North Africa, Nextracker said. The joint venture will assume ownership of Nextracker’s existing manufacturing facility in the area.

For its fiscal second quarter, the company posted earnings of 97 cents a share, above the 85 cents analysts had anticipated, according to FactSet. Revenue climbed 42% to $905.3 million in the quarter, topping forecasts of $842.8 million.

Nextracker also raised expectations for fiscal-year revenue, guiding for between $3.28 billion and $3.48 billion, up from a previous range of $3.2 billion to $3.45 billion. The company simultaneously narrowed its earnings guidance to a range of $3.26 to $3.46 a share, compared with $3.24 to $3.55 previously.

Shares had jumped 7.1% to $96.78 on Friday after rising even higher in premarket trading. The benchmark S&P 500 index was up 1%.

Guggenheim analysts conceded that the company posted “solid numbers” in its latest quarter. However, the firm reiterated a Hold rating on the shares, arguing that it was fairly valued.

“We got the distinct impression during our follow-up call that NXT is willing to take a more aggressive stance on pricing and margins,” analysts wrote. “It is apparent that NXT intends to continue adding to its product portfolio and working to ease integration for customers.”

Similarly, KeyBanc Capital Markets argued the stock’s premium was justified at the current price. The firm maintained a Sector Weight rating.

Nextracker’s outlook reflects the continued benefit from 45X tax credits, which apply to manufacturers of clean energy components in the U.S., analysts noted. They pointed out the company expects revenue in the second half of the year to be weighted toward the fourth quarter, “with some margin impact anticipated due to Section 232 tariffs and a higher percentage of international projects.”

Despite Nextracker’s efforts to strengthen its foothold in other regions, as evidenced by the Saudi Arabia announcement, KeyBanc believes the company’s domestic supply chain “continues to be a strategic advantage,” comprising more than 25 manufacturing facilities in the U.S.

Jefferies analysts reiterated a Buy rating on the stock and boosted their price target to $104 from $84. They highlighted Nextracker’s backlog, which grew to $5 billion from $4.75 billion last quarter, “reflecting sustained demand from both legacy tracker and new product lines.”

The company itself cited this “monotonically increasing backlog” as evidence customers are broadening their spend across Nextracker’s product portfolio, analysts added.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com