Chinese photovoltaic (PV) manufacturer ReneSola Ltd. (SOL) is slated to report its second quarter 2013 results on Aug 15, 2013 before the opening bell. Last quarter it posted a negative earnings surprise of 15.38%. Let’s see how things are shaping up for this announcement.
Factors at Play for 2Q
Based in Jiashan, the People’s Republic of China, ReneSola is a leading global manufacturer of high-efficiency solar PV modules and wafers. Although the company failed to register profits since the second quarter of 2011, it is gradually expanding its portfolio internationally and expects to post improved results during the second half of the year. ReneSola’s first-quarter loss narrowed from the year-ago quarterly loss due to lower operating expenses and higher solar module shipments.
Its Japanese unit began operations in October last year in order to generate revenues and drive business across the country. The company expects more shipments to Japan in the second half of 2013. Japan would soon turn out to be ReneSola’s third largest market following Europe and the U.S. Again, ReneSola announced a new order to provide microinverters, string inverters and mounting products to a new client in Pakistan.
Moreover, ReneSola recently announced the resumption of full production at its Sichuan polysilicon plant. The modernization program included new proprietary reduction furnaces and enhanced hydrochlorination technology. This would minimize energy consumption to less than 100 kilowatt-hours per kilogram (kWh/kg) from the usual 145 kWh/kg. ReneSola had stopped polysilicon production at the Sichuan plant in Nov 2012.
With the increasing need to develop renewable energy in response to stringent environmental regulations, countries worldwide are relying on solar energy for generating electricity. Besides ReneSola, companies like SunPower Corp. (SPWR) and Canadian Solar Inc. (CSIQ) are also making the most of the favorable market dynamics.
Guidance
In July, the company increased its forecast for the second quarter as well as full year 2013. It expects total revenue for the second quarter in the range of $365 million to $375 million, compared with a May forecast of $310 million to $330 million. Shipments are expected in the band of 760 megawatt (MW) to 770 MW, up from the previous expectation of 700 MW to 720 MW. Specifically, the company’s solar module shipments will be in the range of 450 MW to 460 MW versus its earlier projection of 400 MW to 420 MW. ReneSola expects to report gross margin in the range of 5% to 6%, up from its previous guidance of 3% to 5%.
For 2013, ReneSola expects to ship as much as 2.8 gigawatts (GW) to 3.0 GW of solar wafers and modules, up from its previous prediction of 2.7 GW to 2.9 GW. It expects its solar module shipments to be in the range of 1.6 GW to 1.8 GW versus its previous guided range of 1.4 GW to 1.6 GW.
Earnings Whispers?
Our proven model however does not conclusively project that ReneSola is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive earnings Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, 2 or 3 for this to happen. However, that is not the case here due to the following factors:
Zacks ESP: ESP for ReneSola is 0.00% since the Most Accurate Estimate stands at 26 cents, which is in line with the Zacks Consensus Estimate.
Zacks Rank #2 (Buy): ReneSola’s Zacks Rank #2, however, increases the predictive power of ESP. That said we also need to have a positive ESP to be confident of an earnings surprise call.
Stock to Consider
Trina Solar Limited (TSL) has Earnings ESP of +7.81% and holds a Zacks Rank #3. Our model shows that Trina Solar has the right combination of elements to post an earnings beat this season.
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