Q3 EPS Estimates: Solar Winners And Losers

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 |  Includes: CSIQ, CSUN, DQ, HQCL, JASO, JKS, LDK, SOL, STP, TSL, YGE
by: helios q

At this moment we are mired in a major solar bear market. The Q2 numbers were not conducive to ending this bear market. It is looking like Q3 will be the earnings trough for quarterly EPS for 2011. So for the moment, investors in solar stocks are facing an unrelenting series of price declines.

Will this continue forever? No. When will the pain and suffering end? No one knows. Amidst this turmoil, there is hope. Q4 looks better and it is possible that 2012 could show a strong improvement in financial results, even with further average selling module price (ASP) declines for 2012.

This article is the second in a series of five articles for Seeking Alpha leading to a set of stock price forecasts for the eleven solar stocks. Articles in this series will discuss:

  • The earnings summary for Q2 (previous article)
  • The Q3 EPS estimates for the 11 solar stocks (current article)
  • The full year estimates for the 11 solar stocks for 2011
  • The full year estimates for the 11 solar stocks for 2012
  • Stock price forecasts based on the full year estimates

The eleven solars discussed in this article are listed below:

  • Canadian Solar Inc. (NASDAQ:CSIQ)
  • China Sunergy Co., Ltd. (NASDAQ:CSUN)
  • Daqo New Energy Corp. (NYSE:DQ)
  • Hanwha Solarone Co., Ltd. (HSOL)
  • JA Solar Holdings Co., Ltd.(NASDAQ:JASO)
  • Jinko Solar Holding Company Limited (NYSE:JKS)
  • LDK Solar Co. Inc. (NYSE:LDK)
  • Renesola LTD (NYSE:SOL)
  • Suntech Power Holdings Co., Ltd. (NYSE:STP)
  • Trina Solar Limited (NYSE:TSL)
  • Yingli Green Energy Holding Co. Ltd. (NYSE:YGE)

The numbers below are not pretty. Seven of the eleven solars will underperform the Q2 results. Six of the eleven will be mired in losses. Even our favoured stock (JKS) will see a quarter over quarter earnings decline. Still, JKS could show an EPS of $1.21 compared to a reported $1.82 EPS for Q2. Just as a side-note, our research website had estimated an EPS of $1.82 for JKS.

Although the Chinese ADRs are not looking so great, First Solar, Inc (NASDAQ:FSLR) is also having a difficult time. It has fallen from a 52 week high of $175 to about $87.

Please note that we will revise our Q3 estimates just prior to the Q3 earnings release season.

Q3 Estimates Compared to Q2 Actuals

Q2

Q3

%

Stock

Actual

Estimate

Difference

CSIQ

0.16

-0.08

-149

CSUN

-0.42

-0.60

-43

DQ

0.73

0.44

-39

HSOL

-0.12

-0.05

59

JASO

-0.22

0.10

147

JKS

1.82

1.21

-34

LDK

-0.62

-0.07

89

SOL

0.02

-0.08

-513

STP

-0.19

-0.25

-31

TSL

0.17

0.41

140

YGE

0.36

0.11

-69

Click to enlarge

In the table below, we compare our EPS numbers with the Street's. The reader will note that in a few cases, there is a fairly significant difference between our estimates and the Street estimates. The most likely reason is that some of the Street estimates have not been adjusted to reflect the Q2 conference call metrics (please refer to our previous article).

Q3 Estimates Compared to the Street Estimates

Our

Street

%

Stock

Estimates

Estimates

Difference

CSIQ

-0.08

0.14

-156

CSUN

-0.60

-0.17

-254

DQ

0.44

0.44

0

HSOL

-0.05

0

N/A

JASO

0.10

0.07

48

JKS

1.21

0.84

44

LDK

-0.07

-0.03

-130

SOL

-0.08

-0.11

25

STP

-0.25

-0.12

-108

TSL

0.41

0.38

8

YGE

0.11

0.13

-15

Click to enlarge

The Winners and the Losers

Unfortunately, there are no real winners for Q3. JKS continues to shine this year and may have an interesting Street beat of 44%. On a quarter over quarter basis, there are plenty of losers, including SOL, YGE, CSIQ and CSUN. Depending on how one looks at the above tables, it is possible to make a case for individual stock performance.

In general, Q4 should show some marked improvements over Q3. This is assuming that ASPs hover around the $1.20 range. Right now, for 2012, we are modelling an average of $1.11 for the year. If that is the case, then we may be looking at a fairly interesting and somewhat positive year.

Notes to the Tables

  1. With increased uncertainty for a given quarter, the chance for larger variations from the actuals will increase greatly and could be magnified by the unexpected. Using the latest information, these are our estimates to date. We will update these numbers from time to time with new information impacting our solars.
  2. We assume the module ASPs will average $1.23 for Q3.
  3. We have the least confidence in our estimates for CSIQ, CSUN and HSOL.
  4. Under the right conditions, CSUN could provide a pleasant upside surprise but since it has a history of disappointing, we will keep our current low estimate.
  5. It is possible for module ASPs to trend below $1.23, but if strong demand caused modules pricing to trend up to $1.28 or more for Q3, then we would see a significant lift from these current estimates.
  6. In terms of pure investment, JKS remains our favored stock.
  7. Estimates may or may not be based on company guidance. We approach each quarter based on many factors including guidance, company history of sandbagging, maximum quarterly production and general supply and demand environment for solar products.
  8. Our general approach is to start from scratch and build up the estimates. We do not start from company guided gross margin numbers and revenue or shipment numbers. We may crosscheck on those metrics.
  9. Our estimates do not include one time entries such as forex gains or losses.

Disclosure: I am long LDK, JKS, DQ, YGE.