Most solar stocks had a gloomy start to 2010, but there have been some rays of light as the Q2 earnings season winds down. Key players in the solar energy space are delivering their technology in manners that are more cost effective than in the past and production is on the upswing. These developments will prove to be of paramount importance as selling prices have come under pressure. Here is how four prominent solar companies have been fairing as of late.
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Lean and Mean
The juggernaut that is First Solar (Nasdaq:FSLR) was able to grind out a respectable Q2 pat the end of last month, in light of a difficult operating environment. Net sales were up 11.8% on a year-over-year basis on higher production volume. The company was also able to drive its photovoltaic (PV) module manufacturing costs down 13% over the same time period.
These positive trends were not enough to offset the impact of lower module average selling prices, and increases in other operating expenses which ultimately resulted in First Solar reporting a 12.8% drop in Q2 EPS on a year-over-year basis. The company did raise its full-year forecast above analysts' estimates, but clearly First Solar is bracing itself for leaner times.
Suntech Power Holdings (NYSE:STP) has also opted to follow a similar strategy of ramping up production despite pressure on selling prices. The company's Q2 results which were released on Wednesday showed an 11.9% increase in PV shipments from Q1 and a 181.7% increase from the prior year quarter. Suntech expects this trend to continue on into Q3 as it continues to expand its capacity.
More Sunshine in the Forecast
On Thursday, Yingli Green Energy (NYSE:YGE) posted a strong Q2 in which net revenue spiked 10.2% over the previous quarter and 80.1% from a year ago. The company benefited from an increase in shipment volume and record margins. Yingli ended the quarter in the red though, due to losses on the extinguishment of debt and derivative liabilities.
The concern going forward for Yingli is how average selling prices are going to hold up in the second-half of the year. This is a matter that is likely to persist in the intermediate term for both Yingli and its competitors. As long as demand continues to remain healthy, this company is heading in the right direction, despite any obstacles it may encounter.
When Trina Solar (NYSE:TSL) reports its earnings in the coming days, Wall Street is expected a similar outcome. Analysts are calling for the company to report EPS growth of 36.1% and total revenue is expected to more than double in comparison to the year-ago quarter. Investors will want to tune in for the release to see what Trina management's take is on average selling prices going forward. TSL shares are down 15.3% year-to-date.
The Bottom Line
The bar was not set very high for this class of stocks coming into the earnings season. With many solar names having seen their stock prices battered and average PV selling prices under siege, there has been an ample amount of pessimism hovering over the industry. These factors only account for part of the story though. These companies have been resilient in terms of pushing manufacturing costs lower and increasing production to meet a hearty demand. The solar industry is in for a tough battle over the long-term, but overall I would chalk this quarter up as a win for the solar companies. (Learn more about the solar industry, see Spotlight On The Solar Industry.)
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