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  • No Power Behind Suntech Power's Q3 Results 0 comments
    Nov 18, 2010 6:37 AM | about stocks: STP, KWT, TAN

    China based Suntech Power Holdings Co. (NYSE:STP) that produces industry-leading solar products for residential, commercial as well as industrial utility applications, has witnessed a disappointing quarter as third-quarter profit fell short of Wall Street forecasts mainly due to the rising higher costs for silicon. At Suntech, net income for the third quarter climbed to $33.1 million, or 18 cents per American depository share, from $30 million, or 16 cents per ADS, a year earlier while most analysts were expecting an average forecast of 23 cents per ADS.

    Q3 Results Overview: Total net revenues for the third quarter of 2010 were $743.7 million, an increase of 19.0% from $625.1 million in the second quarter of 2010 and an increase of 57.2% from $473.1 million in the third quarter of 2009. Net other expense was $74.1 million in the third quarter of 2010, compared with net other income of $24.1 million in the second quarter of 2010. The net other expense in the third quarter of 2010 was mainly due to mark to market losses from hedging activities. The net impact of losses related to hedging and foreign exchange fluctuations was approximately $32.1 million in the third quarter of 2010. Equity in earnings of affiliates in the third quarter of 2010 was $23.1 million compared to equity in loss of affiliates of $100.6 million in the second quarter of 2010. For the third quarter of 2010, consolidated gross profit was $122.0 million and gross margin was 16.4% compared to consolidated gross profit of $113.9 million and gross margin of 18.2% in the second quarter of 2010 while operating expenses for the third quarter of 2010 decreased to $59.5 million compared to $132.9 million in the second quarter of 2010.

    Future Plans: Suntech, China's largest maker of the equipment that turns sunlight into electricity also said it plans to acquire 375 megawatts of polysilicon ingot and wafer slicing capacity for $127 million in a deal expected to add to earnings immediately after it closes. In the fourth quarter of 2010, Suntech expects at least 10 percent sequential growth in shipments.  Suntech is targeting to ship more than 1.5GW of solar products in 2010, representing year-over-year growth of at least 113%. Suntech had earlier announced it is in the process of integrating 375MW of ingot and wafer slicing capacity in China. The wafer manufacturing capacity is being spun off from a subsidiary of Glory Silicon Technology Investments (Hong Kong) Limited, in which Suntech holds an equity investment.

    Trends: While solar demand is expected to reach record levels this year, many analysts expect ever-increasing capacity to put pressure on prices next year.

    As highly refined silicon panels may never be as inexpensive or productive as fossil fuels. Without continued government subsidies, solar could die sooner rather than later, some of the other attractive Solar Power Alternate Investment Options:

    Solar ETFs

    Market Vectors Solar Energy (NYSEARCA:KWT): This ETF focuses on mid cap securities, which make up more than half of the fund’s total assets. KWT’s top holdings are Renewable Energy Corp. and MEMC Electronic Materials, which combine to make up 22.6% of the fund’s total assets.

    KWT Top Ten Holdings

       1. First Solar, Inc. (NASDAQ:FSLR): 12.76%
       2. MEMC Electronic Materials (WFR): 9.37%
       3. Suntech Power Holdings Co., Ltd. ADR (STP): 8.48%
       4. Trina Solar Limited ADR (NYSE:TSL): 8.27%
       5. SMA Solar Technology AG (S92): 4.80%
       6. Yingli Green Energy Holding Company, Ltd. (NYSE:YGE): 4.62%
       7. SolarWorld AG (SWV): 4.52%
       8. Gintech Energy Corporation (3514): 4.38%
       9. JA Solar Holdings Co., ADR ADR (NASDAQ:JASO): 3.89%
      10. SunPower Corporation (SPWRA): 3.54%

    Expense Ratio: 0.65%

    Claymore/MAC Global Solar Index (NYSEARCA:TAN):
    TAN offers investors a greater level of exposure to small cap securities by investing slightly more than two-thirds of its total assets in small cap firms. Its largest holding is First Solar, which makes up 10% of the fund’s total assets.

    TAN Top Ten Holdings

       1. First Solar, Inc. (FSLR): 9.93%
       2. Meyer Burger Technology AG (MBTN): 5.31%
       3. Trina Solar Limited ADR (TSL): 5.22%
       4. Suntech Power Holdings Co., Ltd. ADR (STP): 4.94%
       5. MEMC Electronic Materials (WFR): 4.89%
       6. Renewable Energy Corporation ASA (REC): 4.74%
       7. SolarWorld AG (SWV): 4.68%
       8. Yingli Green Energy Holding Company, Ltd. (YGE): 4.68%
       9. SMA Solar Technology AG (S92): 4.57%
      10. SunPower Corporation (SPWRA): 3.74%

    Expense Ratio: 0.65%

    Disclosure: No Positions

    Stocks: STP, KWT, TAN
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