Why ReneSola Earnings Still Won't Shine

ReneSola (NYSE: SOL  ) will release its quarterly report on Thursday, and as prospects in the solar industry overall have improved, the stock has enjoyed some extremely impressive gains. Yet ReneSola earnings are likely to show that the company has a long way to go before it can reached sustainable profitability, and it still has obstacles to overcome before investors should give the all-clear signal.

The Chinese solar industry has been under a huge amount of pressure lately, as harshly competitive conditions have led to an almost complete lack of pricing power and sustained losses for nearly all of the industry's players. ReneSola has been among those hardest hit, posting negative gross margins during the full 2012 year as well as the first quarter of this year. But can recently improved conditions help bail out the Chinese solar industry? Let's take an early look at what's been happening with ReneSola over the past quarter and what we're likely to see in its quarterly report.

Stats on ReneSola

Analyst EPS Estimate

($0.30)

Year-Ago EPS

($0.40)

Revenue Estimate

$367.73 million

Change From Year-Ago Revenue

58%

Earnings Beats in Past Four Quarters

0

Source: Yahoo! Finance.

Is it time for ReneSola earnings to get sunnier?
Analysts have remained pessimistic about ReneSola earnings in recent months, having widened their loss estimates by $0.03 per share for the June quarter and by $0.17 per share for the full 2013 year. The stock, though, has climbed a whopping 140% just since early May.

In stark contrast to its share price, ReneSola's recent earnings results have been questionable at best. Even though the company managed to narrow its loss during the first quarter compared to year-ago levels, it still fell short of expectations as prices for solar panels dropped. Even calls for improved revenue during the second quarter weren't enough to keep the stock from plunging 13%.

Yet since then, a number of industrywide events have bolster prospects for solar companies throughout China. U.S. solar giant SunPower (NASDAQ: SPWR  ) gave improved guidance in its earnings report back in May, helping raise not only its own prospects but also those of its Chinese counterparts. More importantly, the Chinese government has committed to build more than 35 gigawatts of solar projects between now and 2015, essentially putting a floor underneath the Chinese solar market from the big ramp-up in demand.

ReneSola won a company-specific victory last month, when it made a 63-megawatt deal with Thailand's Energy Absolute to supply solar modules between this month and October. The deal adds to rising shipment volumes, although it still raises the question of whether increased sales at negative gross margins are actually an improvement.

Arguably the best news for the industry came when a potential solar trade war among the U.S., Europe, and China was resolved with relatively modest European tariffs on solar cells and price floors on solar modules, combined with Chinese tariffs on U.S. polysilicon. The tariff will help ReneSola and LDK Solar (NASDAQOTH: LDKSY  ) because of their spare capacity to produce polysilicon. But China's move will actually hurt Chinese companies Yingli Green Energy (NYSE: YGE  ) and Trina Solar (NYSE: TSL  ) , with Yingli saying higher tariffs will raise overall costs and Trina needing to buy roughly half of its input polysilicon from outside sources.

In the ReneSola earnings report, watch to see whether the company will deliver on its guidance for increased shipment volume and revenue. Unless the company can figure out how to make a profit on its sales, it's hard to see ReneSola's stock going much higher in the long run.

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  • Report this Comment On August 14, 2013, at 11:32 AM, jsIRA wrote:

    SOL already indicated that it Q2 gross margin will be in 11%-12% range, not negative.

  • Report this Comment On August 14, 2013, at 5:26 PM, solarfuture wrote:

    I have to wonder if Mr. Dan Caplinger even follows solar press releases let alone read the press releases of the solar company he decides to write about.

    Renesola raised its guidance on July 16 and increased gross margins to POSITIVE 5-6%, raised revenues, raised MWs, and raised 2013 guidance.

    I suggest in the future Mr. Dan Caplinger do a simple google search for the company he writes and read all the PR for the last 3 months before writing an article.

    Or better yet, maybe the fool.com editor could do some fact checking of his own before deciding to put a worthless garbage article like that under its banner.

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