Last week, in my look at LDK Solar's (NYSE: LDK ) tough outing, I pointed to SunPower (Nasdaq: SPWRA ) (Nasdaq: SPWRB ) and Energy Conversion Devices (Nasdaq: ENER ) as "better places for your money," provided you were inclined to bank on a bounce-back sometime later this year. On Monday, ECD trotted out not only a warning on its fiscal third quarter, but a corporate restructuring and an expansion slowdown to boot!
So that's kind of embarrassing for yours Fool-ly. But having based my opinion on a financial report delivered just about a month prior, I think this turn of events is a bit more embarrassing for the management team that got its near-term outlook so wrong. It was one thing to get caught flat-footed by the freeze in the fall, but becoming prematurely optimistic mid-meltdown is quite another.
Of course, ECD did point out in the last quarterly press release that its guidance was "subject to a variety of risks, including customer credit availability, timing of project closures and consumer and corporate confidence." Given ECD's -- or practically anyone else's -- inability to correctly anticipate such unpredictable shifts, this would seem like a great time to do away with quarterly guidance. But that's another conversation.
Let's dig into the actual changes afoot here, shall we?
First off, top-line guidance for ECD's solar product revenue in the present quarter has been cut from the $90 million to $105 million range to a level approximately on par with the prior year ($65 million, for those wanting an actual number). We're thus talking about solar revenues roughly one-third lower than recently projected (and sequentially as well).
It's clear that First Solar (Nasdaq: FSLR ) had the benefit of a few extra weeks of market data before sharing a gloomy outlook that shocked a lot of solar investors. Recall that the thin-film leader's top concern was overproduction. ECD is clearly on the same page, judging by its decision to halt production for two weeks, postpone ramp-up of the new Battle Creek site, and consolidate its two Auburn Hills facilities. That last move will involve 70 layoffs.
Fools, I have to recommend remaining in show-me mode when it comes to these solar shops. These cloudy conditions could mark a decent time to initiate a partial position in your favorite PV player, but I think it's far too soon to go "all-in."
Motley Fool CAPS players are mixed on ECD, awarding the company a middle-of-the-road three-star rating. Join the conversation and share your own opinion right here.
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