Will ReneSola Earnings Climb Out of the Shadows of Yingli Green Energy and Trina Solar?

ReneSola (NYSE: SOL  ) will release its quarterly report on Thursday and investors are more uncertain than ever about what the future will bring for the Chinese solar company. Throughout the industry, Trina Solar (NYSE: TSL  ) and Yingli Green Energy (NYSE: YGE  ) have faced many of the same challenges, and they've seen their share prices retreat substantially from their highs a few months ago. Will ReneSola's earnings be able to break that trend?

ReneSola has faced a particularly tough road even among China's solar companies, with big losses forcing the company to incur substantial debt and adding extra strain on its attempts to become profitable. Yet the company saw a big upsurge in revenue last quarter, joining Yingli and Trina in posting positive gross margins and taking an important step toward a sustainable financial future. Now, ReneSola needs to build on that momentum. 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 report.

Stats on ReneSola

Analyst EPS Estimate

($0.22)

Year-Ago EPS

($0.91)

Revenue Estimate

$359.91 million

Change From Year-Ago Revenue

65%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance

Can ReneSola earnings shine brighter this quarter?
In recent months, analysts have gotten much more optimistic about ReneSola earnings, narrowing their third-quarter-loss estimates by a dime per share and cutting full-year 2013 and 2014 loss projections by almost triple that amount. The stock has been volatile during the quarter, rising early but settling back to just a 1% gain since late August.

Most of the optimism about ReneSola came from its second-quarter report, in which the company reported a much narrower loss from the year-ago quarter on a 62% jump in sales. A combination of rising prices on its solar products and a 71% jump in wafer and module shipments helped lift the stock higher. Sales guidance for the third quarter also had investors celebrating, as it essentially left ReneSola sold out of 2013 production capacity and taking orders to fill next year.

Yet the need to raise cash because of its losses and its massive debt hurt ReneSola's stock. In September, the company raised about $70 million in a secondary stock offering, but it had to offer those shares at a 15% discount to the prevailing share price in order to get enough demand. Moreover, the offering included warrants that are exercisable at just above $6 per share, putting a potential ceiling on ReneSola's gains before dilution sets in.

The real benefit for ReneSola could come from improving conditions industrywide. With some companies finally starting to reach the brink of their financial viability, oversupply in the Chinese solar market appears likely to disappear in the near future. Trina Solar's balance sheet is arguably the healthiest of the three companies and thus could benefit most from better industry conditions, but ReneSola and Yingli could also soar if they can ride soaring demand toward eventual profitability.

Meanwhile, ReneSola has continued getting new supply orders. Last month, the company announced projects in Colorado, Texas, New Mexico, Georgia, and North Carolina, showing the extent to which the company is looking to the U.S. market for growth. Yet opportunities exist around the world for ReneSola to capture as well, with Trina and Yingli both looking at areas like Japan for potential gains.

In the ReneSola earnings report, look to see if the company provides a longer-term strategy for it to get out from under its debt. With such a high debt-equity ratio, ReneSola really needs a plan if it wants to put itself in the best possible position to beat out Trina Solar and Yingli Green Energy in the Chinese solar space.

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