Trina Solar's Results Will Ride Growing Global Photovoltaic Demand

| About: Trina Solar (TSL)
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Chinese solar major Trina Solar (NYSE:TSL) is slated to publish its third quarter results before the markets open on November 19, reporting on a quarter that saw strong global demand for photovoltaic products. We expect the company's results to improve on a sequential as well as a year-over-year basis, owing to higher shipments, stabilizing prices and cost improvements. During the second quarter, the company's revenues grew by around 27% to around $441 million while net losses narrowed to around $33 million. Here's a quick look at what to expect and what to watch for when the company releases earnings Tuesday.

Shipments Will Be Led By China And U.S., But Watching For Progress In Other Growth Markets

According to research firm NPD , end market photovoltaic solar demand reached a third quarter high of around 9 gigawatts (GW) this year, marking a 20% year-over-year improvement. Trina Solar also upped its shipment guidance for the third-quarter by around 100 megawatts (MW) to between 750 MW and 780 MW mirroring these trends. While it is likely that China, the United States and Germany will continue to be key drivers of the company's overall shipments, we will also be closely watching the company's progress in markets such as Japan and India, where is presence is somewhat more limited. Japan is expected to become the largest solar market by value this year, since its customers are typically skewed toward higher-end solar panels, and represents an important market for panel manufacturers particularly from a margins perspective. India could also prove an attractive growth market over the long run given its population density, high solar insolation and acute shortage of electric generation capacity.

Margins Will Improve On Stabilizing Prices And Lower Manufacturing Costs

Trina Solar expects it gross margins for the third quarter to improve to between 14.5% and 15.5%, up from around 11.6% during the second quarter. We believe that this could be due to higher panel conversion efficiency (which reduces the amount of materials required to produce each watt of solar panels) as well as better utilization of the company's manufacturing facilities. Trina expects to operate its factories at close to their full capacity of 2.4 GW for this year. Things are likely to have stabilized or even improved on the pricing front. NPD reported that average prices for solar panels declined by just about 1% sequentially in Q3, whereas some other Chinese manufacturers such as Yingli Green Energy (NYSE:YGE), which recently published earnings, have even indicated witnessing improved pricing trends in recent months.

Trefis will be updating its valuation model and price estimate for Trina Solar post the earnings release.