Earnings Previews: Solar’s Cloudy Days (WFR, FSLR, YGE, TSL, SPWRA, TAN)

The solar sector is getting off to a bad start for earnings season as the economy softens and as the market keeps hurting investors.   We have two key solar issues coming out with earnings this week, MEMC Electronic Materials, Inc. (NYSE: WFR) after the close and First Solar, Inc. (NASDAQ: FSLR) on Thursday.  Out of China, Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) and Trina Solar Ltd. (NYSE: TSL) are not managing to do the solar sector any favors.  Ditto for SunPower Corporation (NASDAQ: SPWRA) and the sector impact on the Guggenheim Solar (NYSE: TAN) ETF.

MEMC Electronic Materials, Inc. (NYSE: WFR) has estimates of $0.08 EPS and $699.89 million (lower than last week) in revenues; next quarter estimates are $0.34 EPS and $893.62 million in revenues.  Shares are trading just under $7.00, and the new 52-week trading range after a new low today is now $6.83 to $15.04 and the consensus price target from analysts is $13.44.  MEMC remains a value stock for investors, but it has so far only been a value trap.  Since shares hit a 52-week low just on Friday and again today, how much of a great report can investors really expect from the company?  It still faces an identity crisis as well because its wafer materials production is part semiconductor and part solar. Whether in chips or in solar by thought, both sectors are performing poorly.

First Solar, Inc. (NASDAQ: FSLR) has estimates of $0.92 EPS and $583.9 million in revenues; next quarter estimates are $2.86 EPS and $1.08 billion in revenues.  Shares are trading under $115 today, its 52-week trading range is $111.40 to $175.45, and the consensus price target from analysts is still over $150.00 as of now.  We still expect to be the king of solar outfits and we still expect to see it remain a survivor and even an acquirer.  Our question is not about shrinking margins indefinitely nor about what the company can do to turn its share performance around.  The hex has been put on the sector and austerity-led solar recession could face the company in the years ahead.  First Solar could find itself challenging 52-week lows as oil prices are not even helping.  The only good news: this is cheap and may trade at close to 10-times expected earnings.

Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) is down almost 5% so far today after the company actually raised its shipment and margin targets for the second quarter.  The problem is that no one cares, and it is in China where accountants seem to have a monopoly on free speech when it comes to what they are willing to say on the books.  It is a sad day when PV shipment growth of an already high 30% is bumped to 35% to 37%.

Trina Solar Ltd. (NYSE: TSL) gapped down big yesterday before recovering after it warned on its results, and now shares are down yet again.  Shares are down 5% at $17.19 and the 52-week range is $16.60 to $31.89.  Who cares… it is in China.

After SunPower Corporation (NASDAQ: SPWRA) gave more details in recent weeks, shares have slid down to $18.50 again, taking back almost all of those recent post-‘merger-lite’ gains.

If you want to know just how bad the solar sector is, look no further than Guggenheim Solar (NYSE: TAN) as the key ETF for the sector.  This one hit a new 52-week low of $6.18 today and it is close to its old lows of 2010 but still higher than when it broke under $5.00 at the 2009 lows.

This is sad for what is supposed to be the alternative energy winner.  Solar has gone from hot to snot.  Cloudy days ahead?

JON C. OGG