Slow Solar Market Hits GT Advanced Technologies

When your end markets are challenging it's tough to sell new equipment to manufacturers, a challenge GT Advanced Technologies (Nasdaq: GTAT  ) is dealing with as the PV and LED markets go through rough times.

The company's second-quarter-earnings results were down significantly from the first quarter, but that much was expected, so the market didn't panic in trading yesterday. Revenue was $167.3 million in the quarter, down from $231.1 million a year ago and $353.9 million in the first quarter. A slow quarter in sapphire and PV equipment led to the low numbers this quarter. On the conference call management said that installation cycles will pick up again in the second half of the year and it still expects full-year revenue to be $925 million-$975 million.

The decline in revenue didn't help margins any as gross margin fell to 36% from 43% last quarter. Earnings per share fell from $0.65 to $0.12, or $0.16 per share on a non-GAAP basis.

The big picture
Chinese solar manufacturers are GT's biggest customers and the numbers coming out of China aren't good right now. Trina Solar (NYSE: TSL  ) , one of GT's customers, reduced second-quarter guidance earlier this week and other manufacturers have done the same. Combine that with the negative margins and challenging balance sheets at polysilicon makers LDK Solar (NYSE: LDK  ) , who is also a customer, and Renesola (NYSE: SOL  ) , and the expectations are muted for the next few quarters.

The sapphire business is still in its early stages and still has a $697 million backlog so there's a lot of upside in this new business.

Where GT may really explode higher is when its HiCz product hits the market in mid-2013. This product will be a game-changer in solar if it lives up to is potential by causing a step change in solar efficiency.

Foolish bottom line
Management stuck to its revenue guidance and non-GAAP earnings guidance from May, which projects $1.30-$1.40 in earnings per share. At this rate the stock trades at just 3.7 times earnings, which is a great value even if the company's end markets are challenging right now.

For another energy stock that's a great buy check out our report: "The Only Energy Stock You'll Ever Need". It's free when you click here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1971211, ~/Articles/ArticleHandler.aspx, 8/20/2014 5:59:28 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement