Renewable energy stocks broadly have been consistent underperformers over the past year. According to Koyfin, the iShares Global Clean Energy ETF (NASDAQ:ICLN), which holds more than $2.4 billion worth of renewable energy stocks, plummeted 20.4% in 2023, while the rest of the U.S. equities market enjoyed a sizable rally. The reason for such a disparity is related to elevated interest rates and their disproportionate effect on capital-intensive renewable energy prices. Moreover, oil and gas prices dipped from their 2022 highs, giving consumers and businesses less incentive to switch to a renewable energy resource.
In 2024, renewable energy stocks have largely continued to tick downward in value, particularly as the possibility of near-term rate cuts becomes increasingly far-fetched. This pullback has created an opportunity for value investors to buy up some undervalued renewable energy stocks. Not all renewable energy companies have seen their shares fall, of course, but even the lucky ones still trade at attractive valuations.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) is a well established manufacturer of photovoltaic solar modules. Founded in 1999, the solar panel firm has built a multi-billion-dollar business with manufacturing facilities worldwide. First Solar’s Q1 earnings report for fiscal year 2024 has been the company’s most recent highlight. Net sales increased 45% yearly to $794.1 million, despite decreasing 31% sequentially. The quarter-to-quarter decrease was due to a “seasonal reduction in volume” that the company and investors had already expected.
Looking towards profits, First Solar generated $236.6 million in net income, representing a net margin of 30%. During an earnings call, management highlighted the firm’s ability to grow revenue and earnings and produce 3.6 gigawatts of modules despite the problem of “oversupply” brought upon by Chinese solar companies. Management also noted how data centers will be a key growth lever as data center operators, including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG) desire to increase consumption while striving to be carbon-free.
A good earnings report with new import tariffs on solar modules has led to First Solar’s share price skyrocketing more than 58% YTD. Still, FSLR only trades at 17.8x forward earnings, possibly meaning there is still opportunities for multiple expansion going forward.
Linde (LIN)
Linde (NASDAQ:LIN) is the world’s largest industrial gas producer based out of the United Kingdom. The industrial gas firm primarily manufactures and distributes atmospheric gases such as oxygen and nitrogen and processes gases, including helium, hydrogen and ammonia. Enterprises vary across industries including steelmaking, chemicals, healthcare, petroleum refining and technology and leverage these kinds of industrial gases in their industrial processes.
Despite delivering a solid year of growth in 2023, Linde’s management team predicted a slower 2024 due to present risks in its metal and mining, and electronics end-markets. That has, so far, turned out to be the case. In their Q1 earnings report for fiscal year 2024, Linde reported lower volumes in its Americas and European businesses, which underwhelmed investors. The industrial gas firm also cut its capital expenditure forecast, a bell-weather measure of product demand, while investors had been hoping for an outlook raise.
Linde’s current economic troubles shouldn’t worry long-term investors. The global economy is full of uncertainties at this moment. Still, Linde’s position in the market is undeniable. Moreover, the firm’s electronics end-market is likely to rebound, as semiconductor firms like AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC) are seeing improved demand in their PC segments. Trading at around 27.4x forward earnings, Linde remains an attractive long-term investment.
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) makes the final entry on our list. The company generates, transmits and distributes electricity throughout North America. In recent years, the firm has worked hard to transition from relying on natural gas and other non-renewable energy resources to building up its clean energy portfolio.
The firm delivered a robust Q1 earnings report. The “Florida Power & Light” business segment placed 1,640 megawatts (MW) of solar energy into service, growing net income from $1.1 billion to $1.2 billion on a year-over-year basis. The “NextEra Energy Resources” segment added 2,765 MW of renewable energy and storage to its backlog. The renewable energy firm has maintained its guidance and expects to grow adjusted earnings per share by 6-8% in 2024. NextEra also appears committed to returning capital to investors. The company announced a 0.515/share dividend in late May.
On a year-to-date basis, NEE shares have risen nearly 30%. Trading at 23.2x forward earnings, the firm continues to be a compelling turnaround story in the energy world. As NextEra continues to grow its renewable energy portfolio, the firm will likely be a key player in the space for some time.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
