Yingli Green Energy (YGE): What’s in Store in Q3 Earnings?

Yingli Green Energy Holding Company Limited YGE, better known as Yingli Green Energy, is scheduled to report third-quarter 2016 results before the opening bell on Dec 8.

Last quarter, the company posted a positive earnings surprise of an impressive 400.00%. Yingli Green Energy beat the Zacks Consensus Estimate in three of the four trailing quarters, with an average earnings surprise of 174.94%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

As per its recently released preliminary outlook for the third quarter of 2016, Yingli Green Energy expects photovoltaic (PV) module shipments (including shipments to its own downstream PV projects) in the range of 360 megawatts (“MW”) to 370 MW for the quarter, within the previously guided range of 300 MW–400 MW.

However, the company expects an overall gross margin of 5% to 6% (6–7% for module sales), reflecting a decline from 18.2% recorded in the prior quarter. The estimate falls short of the company’s prior guidance, which as per management was driven by an expected inventory provision and an increase in the unit manufacturing cost on account of lower utilization rate of production capacity.

Earlier, the company announced that apart from expecting a lower number of total shipments, average selling price is likely to drop in the third quarter, on a sequential basis.

Earnings Whispers

Our proven model does not conclusively show that Yingli Green Energy is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of $1.30.

Zacks Rank: Although Yingli Green Energy’s Zacks Rank #3 increases the predictive power of ESP, its 0.00% ESP makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Price Movement

Yingli Green Energy’s stock lost about 97.83% in the last one year, wider than the Zacks Categorized Energy-Alternate Sources industry’s decline of 71.35%. This could have been triggered by the projected decline in shipments in the to-be-reported quarter and the sequential decline in gross margin.

Peer Releases

First Solar Inc. FSLR reported third-quarter 2016 earnings of $1.22 a share, beating the Zacks Consensus Estimate of 69 cents by 76.8%.

ReneSola Ltd. SOL posted a loss of 20 cents per share in the third quarter of 2016, wider than the Zacks Consensus Estimate of a loss of 16 cents.

Canadian Solar Inc. CSIQ reported third-quarter earnings of 29 cents per share, in line with the Zacks Consensus Estimate.

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