Solar Winners And Losers For The Upcoming Q3 Earnings Season

|
 |  Includes: JKS, LDK, SOL, STP, TS, YGE
by: helios q

Over the next two weeks, the solar focus will be on the Q3 release of earnings for the eleven Chinese solar ADRs. The earnings rush for Q3 will start Monday of this week with Daqo New Energy (NYSE:DQ) batting first.

The eleven solar stocks discussed in this article are listed below:

  • Canadian Solar Inc. (NASDAQ:CSIQ)
  • China Sunergy Co., Ltd. (NASDAQ:CSUN)
  • Daqo New Energy Corp. (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 Earnings Schedule

  • November 14 - DQ
  • November 17 - CSUN
  • November 21 - TSL and JKS
  • November 22 - HSOL, JASO, STP and CSIQ
  • November 23 - SOL and YGE

We will end up with a super Tuesday on November 22nd with four solars reporting on the same day. The most interesting numbers might come from JKS. It is the author's view that they will most likely report somewhere between $1 to $1.20. This means that JKS could double the current Street view. I have modeled $1.23 module ASP for JKS. If the ASP is $1.20, then JKS might make only 97 cents in EPS. Unless they have blown up something not reported, they cannot help but crush the Street estimate.

In the tables below, I have updated the EPS estimates for Q3 with the latest information available. There is one company who has not yet confessed nor announced a Q3 release date so any breaking updates on the LDK Q3 EPS revisions will be posted at my Helios Quarterlies website.

Although the Q3 earnings are pretty well acknowledged as an overall disaster, the Q3 conference calls should release a wealth of new information regarding the short term trends in pricing, Q4 sales and how companies are viewing expansion for 2012.

Third Quarter Estimates Versus the Street Estimates

Our

Steet

%

Stock

Estimates

Estimates

Difference

CSIQ

-0.73

-0.39

-88

CSUN

-0.81

-0.4

-103

DQ

0.45

0.43

4

HSOL

-0.02

-0.08

70

JASO

0.11

0

N/A

JKS

1.15

0.5

129

LDK

-0.07

-0.14

51

SOL

-0.08

-0.12

32

STP

-0.21

-0.26

20

TSL

-0.13

0.07

-288

YGE

-0.17

0.05

-446

Click to enlarge

From the table above, it appears that some of the percentage surprises are potentially large from the Street estimates. However, the absolute cent differences are not too bad. As an example, we have estimated that TSL will lose about 13 cents for Q3 whereas the Street has a seven cent profit. The percentage variation of 288% is huge but the actual 20 cent difference is not that great. Most likely some analysts have not yet updated their numbers from the latest TSL guidance revisions.

The Amazing JKS

The most interesting numbers might come from JKS. It is the author's view that they will most likely report somewhere between $1 to $1.20. This means that JKS could double the current Street view. I have modeled $1.23 module ASP for JKS. If the ASP is $1.20, then JKS might make only 97 cents in EPS. Unless they have blown up something not reported, they cannot help but crush the Street estimate.

A Few Words on LDK

LDK is a bit worrisome. They sold 80 MW of modules for Q2 and guided roughly 300 MW for Q3. Since TSL greatly reduced guided sales and others have also reduced module sales for Q3, I can only assume that LDK will not reach an ambitious goal of over tripling module sales in one quarter.

A Comparison of the Q3 Results to Q2 Actuals

Q3 EPS Estimates and Comparison to Q2 EPS Actuals

Q2

Q3

%

Stock

Actual

Estimate

Difference

CSIQ

0.16

-0.73

-557

CSUN

-0.42

-0.81

-93

DQ

0.73

0.45

-39

HSOL

-0.12

-0.02

80

JASO

-0.22

0.11

150

JKS

1.82

1.15

-37

LDK

-0.62

-0.07

89

SOL

0.02

-0.08

-508

STP

-0.19

-0.21

-9

TSL

0.17

-0.13

-177

YGE

0.36

-0.17

-148

Click to enlarge

From the table above, it appears that eight of the eleven solars will under-perform Q2 results. And while we are on depressing stats, it appears that six of the eleven solars will show declining earnings for Q4 over Q3.

Summary

Over the next few weeks, there is not much that will encourage our current mini-bull market. The absolute Q3 and Q4 numbers look bad, the comparisons to the Street are not great and comparisons to Q2 actuals are generally abysmal.

Our previous two articles dealing with 2012 EPS estimates painted a more promising picture but even for next year, I have stressed that our solars clearly hang on a very delicate balance between bull market and bear market module ASPs.

Notes to the Tables

As we go further out from the current quarter estimates, the chance for greater variations from the actuals could increase greatly and the variations could be magnified by unexpected events. One example would be changes in the Euro versus the US dollar. Using the latest information, these are our best estimates to date. We will update these numbers each quarter with new information impacting our solars.

Due to the extreme module pricing volatility, our results could vary greatly with changes in the module pricing.

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.

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. This is analogous to a chef purchasing a soup stock versus making soup stock from scratch.

Our estimates do not include one-time entries such as forex gains or losses.

Disclosure: I am long JKS, YGE.