Nextracker's Beating the Clock: Can the Earnings Streak Continue?

Nextracker (NASDAQ:NXT) has spent the past two years rewriting the script for solar energy investors, consistently exceeding earnings expectations even as its industry grapples with headwinds. With its next earnings report due on August 7, the question is whether this streak of outperformance can continue—or if the market's skepticism, reflected in Zacks' bearish rank, finally catches up. Here's why the answer matters for investors.

The Earnings Streak: Data-Backed Dominance

Nextracker's recent track record is undeniable. Over the past eight quarters, it has beaten EPS estimates in seven instances, with an average surprise of 53% in the last two quarters. The most striking performance came in Q3 2024, when it delivered a 74.58% EPS beat, nearly doubling consensus expectations. Even more telling, revenue has exceeded forecasts in four straight quarters, including a 11.6% beat in Q1 2025 when revenue hit $924.3M.

This consistency has fueled a 48% year-to-date stock gain as of July 2025. Yet, the market's reaction to these beats has been uneven. While shares surged 13% after its May earnings report, a 15% drop followed its August 2024 results—a reminder that macro factors (like broader solar sector weakness) can overshadow even strong fundamentals.

Zacks Metrics: A Split Signal

Nextracker's Zacks Earnings ESP of +2.77% suggests analysts are gradually raising estimates, a bullish sign. However, its Zacks Rank #4 (Sell) highlights a critical divergence: while the company beats estimates, analysts are downgrading their long-term outlook. The disconnect stems from two factors:
1. Industry headwinds: The solar sector ranks in the bottom 24% of Zacks industries, pressured by supply chain costs, permitting delays, and trade disputes (e.g., AD/CVD tariffs).
2. Margin pressures: Operating margins fell to 21.1% in Q1 2025 from 36.8% a year earlier, as rising expenses outpaced revenue growth.

The next earnings report will test whether these challenges are temporary or structural. Analysts currently project a $1.03 EPS for Q2 2025—a figure that, if matched, would represent a 20% sequential drop from the prior quarter's $1.29. Nextracker must prove it can sustain its earnings power in the face of slowing growth expectations.

Valuation: Paying Up for Growth

At a trailing P/E of 18.19, NXT trades at a premium to the broader market and its solar peers. This reflects investor optimism about its $4.5B backlog (up 12.5% YoY), which covers 80% of the next two years' revenue. Yet, valuation risks emerge if the company fails to convert this backlog into profitably delivered projects. Key metrics to watch:
- Revenue growth: Analysts project a slowdown to 6.9% annual growth in 2026, down from 24.7% in 2024.
- Margin recovery: Operating margins must rebound toward historical levels (e.g., 36.8% in Q1 2023) to justify the P/E premium.

The Case for Caution—and Opportunity

Buying NXT ahead of earnings is a high-risk, high-reward bet. The positives are clear:
- Backlog strength: Its $4.5B pipeline, bolstered by Inflation Reduction Act (IRA) incentives for U.S.-made solar equipment, suggests demand is robust.
- Strategic moves: Acquisitions like Ojjo (geotechnical expertise) and Solar Pile International aim to solidify its competitive edge in complex projects.

But risks loom large:
- Margin pressures: Logistics and labor costs remain elevated, squeezing profitability even as revenue grows.
- Sector drag: Solar stocks have underperformed as AD/CVD tariffs and permitting delays slow project timelines.

Investment Thesis

Buy the dip if estimates are raised ahead of earnings. NXT's stock has historically rallied post-beats, but this time, investors may demand clearer margin improvement or backlog conversion proof. A $1.03 EPS beat (e.g., $1.10+) could push shares to $65–$70, but a miss risks a retest of $45 support as Zacks' “Sell” rank gains credibility.

Hold for the long term if margins stabilize. The backlog and IRA tailwinds suggest NXT remains a leader in a sector poised for recovery. However, investors must balance near-term risks against its structural growth in utility-scale solar.

The August 7 report will be a litmus test: can Nextracker's execution outpace its industry's struggles, or will the Zacks Rank prove prescient? The answer could redefine its trajectory for years to come.