A rise in natural gas prices in Europe contributed to Enphase Energy’s strong second-quarter results.
After Enphase exceeded revenue expectations for the second quarter, the company’s shares, which provide solar energy components and battery systems, increased by more than 9% during extended trading on Tuesday.
This is how Enphase did compared to the expectations compiled by Refinitiv:
- Earnings were $1.07 per share after adjusting.
- Revenue: $530 million compared to anticipated $505 million.
In Europe, revenues jumped 69% over the previous quarter, largely driven by the growth of markets like Germany and the Netherlands.
Currently, over 80% of Enphase’s revenue comes from the United States. Chief Executive Officer, Badri Kothandaraman, feels that this is beginning to change soon.
“Maybe in two years from today, that number will get closer to 50/50,” he told, europe being the major contributor to international revenue.
This expansion possibility comes as Europe rushes to overhaul its energy grid in an effort to wean itself off of Russian fuel.
A voluntary reduction of 15% in gas consumption was agreed upon by the bloc on Tuesday. In addition, the region has promised to expand its renewable energy infrastructure.
At the same time, fuel prices are soaring.The price of Dutch TTF natural gas futures increased by 19.8% on Tuesday to reach the highest level since March of 211.70 euros per megawatt hour.
Argus Media estimates that price to be $63 per million British thermal units (MMBtu), which is the price of U.S. natural gas.
To put the movement into perspective, on Tuesday, U.S. natural gas futures reached $9.75 per MMBtu, which was the highest level since 2008 but far below European prices.
Kothandaraman believes that there will be an additional 40% increase in European revenue for the current quarter.
“We are aggressively expanding the team. We expect this momentum to continue,” during the company’s results call, he said.
As utility bills rise in the U.S., Enphase is also seeing an increase in demand there. Consumers are increasingly seeking energy independence also as a result of frequent grid outages.
A record $530 million was reached in total sales for the business, which manufactures microinverters and backup energy storage for solar systems. Gross margins improved from 40.1 to 41.3 percent from one quarter to the next.
As part of their latest earnings report, Enphase offered an optimistic projection for the first quarter of the year, ranging from $590 million to $630 million. Estimates provided by Street Account indicate that Wall Street was asking for $550.5 million.
In recent months, the industry has faced a number of challenges, such as supply chain issues, rising raw material prices, and policy uncertainty.
Most recently, Senator Joe Manchin stated that he is opposed to the reconciliation package’s climate expenditures, at least temporarily. The financing came with an extension of the Investment Tax Credit. It has always enjoyed cross-party support and was most recently extended in 2020.
Kothandaraman referred to the delayed funding as a “setback.”
“Right now it would be good if the government provides an impetus, at least in the form of tax credits,” he said.
“But even if that doesn’t happen [the industry will be] maybe a little slower to grow, but everybody sees the benefit,” he added.
