Trina Solar Ltd. (NYSE: TSL) put a hurt on the solar sector today. The company reported that its first quarter earnings were under street estimates but within range of its freshly issued soft guidance. Earnings came in at $0.64 EPS. Revenue was up handily at to $551 million, up about 14% sequentially and up over 60% from a year earlier. We had estimates of over $1.00 EPS and closer to $580 million, but the company had just recently talked down expectations.
We saw the reaction in First Solar Inc. (NASDAQ: FSLR) was up, but the move seen in SunPower Corporation (NASDAQ: SPWRA), Suntech Power Holdings Co. Ltd. (NYSE: STP), Jinko Solar Co., Ltd. (NYSE: JKS), LDK Solar Co., Ltd. (NYSE: LDK), Yingli Green Energy Holding Co. Ltd. (NYSE: YGE), and Canadian Solar Inc. (NASDAQ: CSIQ) took shares south. After we took a look at the news out of Trina today, the reaction here in many peers may not be fair when we consider that many solar players already reported.
The company plans to boost its PV production later in the year to meet demand, but it looks like margins are weakening ahead and in retrospect. Trina’s gross profit margins as a percentage of sales were 27.5% this last quarter versus 30.9% a year before. What investors are digesting in the solar space is a wave of lower and lower margins. Unfortunately, that is something that is going to be the norm. Solar companies will just have to live with lower margins. Government subsidies are at risk in an age of austerity and the cost is not always justified in many solar projects today.
Trina shipped about 320MW, down from a view of more than 350 but in-line with its recent forecast of 320MW to 322MW. Trina claimed to have market share gains in Germany and also in other Euro-regions. Trina Solar Ltd. (NYSE: TSL) closed down almost 7% at $23.11 and its 52-week range is $14.85 to $31.89. Its market cap is larger than many solar players, but it is still only $1.8 billion.
First Solar Inc. (NASDAQ: FSLR) bucked the trend. Shares closed up over 1% at $126.62 and its 52-week trading range is $100.19 to $175.45. SunPower Corporation (NASDAQ: SPWRA) was a bit insulated due to its recent near-merger with Total SA in Europe. SunPower shares closed down 0.45% at $21.01 and its 52-week trading range is $9.61 to $22.60.
Suntech Power Holdings Co. Ltd. (NYSE: STP) shares closed down 3% at $8.05 and its 52-week trading range is $7.05 to $11.41.
Jinko Solar Co., Ltd. (NYSE: JKS) closed down 6.2% at $25.75 against a 52-week range of $8.23 to $41.75. Jinko was one which we recently identified as having a valuation so cheap that you almost have to do a double-take when you look.
LDK Solar Co., Ltd. (NYSE: LDK) shares closed down 7.2% at $8.61 and its 52-week trading range is $4.97 to $15.10.
Canadian Solar Inc. (NASDAQ: CSIQ) shares closed down 1.7% at $9.17 and its 52-week trading range is $8.99 to $17.63.
Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) is due with earnings this coming Friday and the damage here was severe as the rationale is that bad news at one is bad news for the rest of the reports. Its shares closed down 3.4% at $10.17 and its 52-week trading range is $8.31 to $14.29.
The Guggenheim Solar ETF (NYSE: TAN) was down by 2.2% at $7.66 against a 52-week range of $6.02 to $9.34.
Some of these companies have already reported earnings. It was no secret that margin compression was to be expected. We’ve only been discussing it for a year or so.
JON C. OGG
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