Investors took a punch in the gut on Wednesday morning, as the credit rating agency Fitch downgraded its rating on U.S. government debt to from its highest rating of AAA to its second-highest of AA+. Stock index futures reacted negatively, with losses of roughly 0.5% to 1% early Wednesday morning.
Some stocks saw much greater losses after reporting their latest financial results. Both SolarEdge Technologies (SEDG 9.03%) and Generac Holdings (GNRC +1.42%) watched their stocks soar to extremely high levels in recent years, but the negative response to their quarterly reports left long-term shareholders wondering whether the best days for the two companies are in the past. Below, you'll learn more about what SolarEdge and Generac said.
A shadow over SolarEdge
Shares of SolarEdge Technologies were down 15% in premarket trading early Wednesday. The solar power system component manufacturer reported second-quarter financial results that fell short of the high expectations that its shareholders had.
Although some of SolarEdge's financial metrics posted new records, the pace of the company's growth has slowed somewhat. Second-quarter revenue of $991 million was up 36% year over year, but it rose by just 5% from three months ago. Similarly, adjusted net income of $157 million nearly tripled from year-ago levels, but it was down 10% from the first quarter of 2023. Adjusted earnings came in at $2.62 per share.
NASDAQ: SEDG
Key Data Points
Even worse, SolarEdge expects further slowdowns ahead. Projections for the third quarter had revenue in a range of between $880 million and $920 million, implying a sizable sequential sales decline. Adjusted operating income could fall as much as 40% from second-quarter levels.
CEO Zvi Lando cited higher interest rates in the U.S. as causing the residential solar market to struggle, but also noted that performance in Europe remains encouraging, in both the residential and the commercial solar segments. SolarEdge hopes to use its diverse geographical and product lines to make it through tough times in the U.S. market, but investors seem less comfortable with the solar stock's prospects in the short run.
Generac loses power
Shares of Generac Holdings took an even bigger hit, dropping 17% in premarket trading. The maker of backup generator equipment reported second-quarter financial results that showed considerable weakness due largely to the ailing housing market.
Generac's sales dropped 23% year over year in the second quarter to $1 billion. That came largely because of a 44% plunge in residential product sales, which represent about half of its overall revenue. As a result, adjusted net income fell by more than 60% to $68 million, and adjusted earnings came in at $1.08 per share.
NYSE: GNRC
Key Data Points
CEO Aaron Jagdfeld said that some of the weakness came from extremely strong backlog reductions that juiced sales higher in the year-ago period, but residential product sales were nevertheless slightly lower than Generac had expected. That's pointing to possible weakness from consumers on discretionary purchases.
On the bright side, though, commercial and industrial demand for Generac's products remained robust, with sales in that segment climbing 24% year over year. Serving its commercial market more effectively is one of Generac's strategic goals, and with ongoing long-term concerns about the state of energy infrastructure, the company believes that the case for backup power solutions is now stronger than ever. It'll take a big rebound, though, to get the stock back to its 2021 levels after a drop of nearly 75% from its highs.
