JA Solar Holdings Co. Ltd. (JASO) announced earnings of 14 cents per American Depositary Share (ADS) in the second quarter of 2014, missing the Zacks Consensus Estimate of 17 cents by 17.6%. Earnings also dropped 56.3% from 32 cents per ADS a year ago and 75.9% from 58 cents per ADS in the preceding quarter.
Higher operating expenses led to lower-than-expected profits with the stock price tumbling 6.31% in yesterday’s trading session to close at $9.36.
Total Revenue
JA Solar’s revenues in the reported quarter were $390.5 million, comfortably beating the Zacks Consensus Estimate of $385.0 million by 1.4%. Revenues also increased 52.9% year over year and 6.5% sequentially.
Shipments
Total shipments in the second quarter 2014 were 681.8 megawatt (MW), up 47% from 463.7 MW shipped in the year-ago period. The reported figure also increased 6.8% from 638.1 MW in the first quarter of 2014.
The year-over-year improvement in shipments was attributable to 75.6% and 12.5% increase in module and cell shipment, respectively. In fact, modules and cells comprised 65.4% and 34.6% of total shipments in the reported quarter.
Increasing shipments came on the back of a strong Asia-Pacific market (excluding China) which constituted 47.1% of the total quarterly shipment. Shipments to China represented 26% of the total, while demand in Europe remained at 13.9%. North America witnessed an impressive surge sequentially and represented 9% of the company’s module sales.
Operational Highlights
Gross profit was $59.3 million or 15.2% of total revenues, compared with $21 million or 8.1% of total revenues in the year-earlier period and $61.2 million or 16.7% of total revenues in the first quarter of 2014.
Total operating expenses increased 69.7% year over year and 26.9% sequentially to $44.8 million.
Financial Condition
At the end of the second quarter, JA Solar had a cash balance of $326.9 million versus $352.2 million at 2013 end. Total long-term bank borrowings were $305.5 million, of which $43.8 million were due in one year. Total long-term bank borrowings were $411.3 million at the end of 2013.
Guidance
Management has provided an optimistic guidance for 2014 on the back of a flourishing solar industry. The company expects lucrative opportunities from the emerging markets of Latin America and the Middle East. Expansion of its downstream project pipeline will also give its business a boost. Besides the Japanese and North American markets, it also expects favorable demand from its Chinese domestic market.
JA Solar expects to ship 730–760 MW of cells and modules in total for the third quarter. For 2014, the company lifted its full year cell and module shipment guidance to 2.9–3.9 GW from its earlier expectation of 2.7–2.9 GW. The revised outlook includes 200 MW of module shipments to the company's downstream projects.
Peer Comparison
JinkoSolar Holding Co., Ltd. (JKS) reported second-quarter 2014 non-GAAP earnings per ADS of 80 cents, surpassing the Zacks Consensus Estimate of 69 cents by 15.9%. In the prior-year quarter, the company’s adjusted earnings per ADS were 56 cents. The outperformance was primarily driven by higher revenues and a rise in total solar product shipments.
Canadian Solar Inc. (CSIQ) reported second-quarter 2014 earnings of 95 cents per share, reversing its year-ago loss of 29 cents per share and beating the Zacks Consensus Estimate of earnings of 58 cents.
ReneSola Ltd. (SOL) reported earnings per ADS of 1 cent in the second quarter of 2014, reversing the year-ago loss of 24 cents per ADS. The Zacks Consensus Estimate was a loss of 15 cents per ADS.
Zacks Rank
Shanghai, China-based JA Solar Holdings Co. currently holds a Zacks Rank #3 (Hold).
Although the company failed to catch up with the Street expectation on its bottom line, it nonetheless delivered a solid quarterly performance. This reflects the company’s resilient business model and its ability to quickly adapt to market demand. JA Solar has an attractive product and geographic mix. With the second quarter release, this China-based solar products manufacturer reported its third-straight quarterly profit, backed by higher prices and solid module demand.
As trade conflicts intensify, primarily targeting Chinese solar manufacturers, JA Solar is considering different strategies for doing business in the U.S. After all the U.S. remains an important and booming solar destination.
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