I can't get the song from Mad TV's Lowered Expectations series from playing in my head every time a solar manufacturer has lowered expectations in recent weeks. They've come at a fast and furious pace and it's beginning to get stuck in my head.
The optimistic guidance numbers manufacturers gave should have been thrown out the window a long time ago, and considering the drop in stocks, investors probably didn't expect them to be hit. But right now, most manufacturers of solar modules have lowered their guidance for the third quarter or even for all of 2011.
- Trina Solar (NYSE: TSL) lowered module shipment estimates for the third quarter to a range of 372-375 megawatts from a previous range of 480-520 megawatts.
- Yingli Green Energy (NYSE: YGE) expects shipment growth to be a percentage in the low twenties versus a previous estimate of in the high twenties. It also expects gross margins of 10%-11% from a previous percentage estimate in the middle to high teens.
- ReneSola (NYSE: SOL) lowered module guidance slightly to 320-330 megawatts from 330-350 megawatts. Revenue is expected to be between $185 million and $195 million from a previous expectation of $220 million-$240 million, and gross margins will be 5.5% to 6.5%.
The lowered guidance shouldn't come as a major shock considering weak demand and guidance numbers from First Solar (Nasdaq: FSLR) and SunPower (Nasdaq: SPWRA). What it does show is how these companies' power plant development units have helped those two solar leaders withstand a hit to overall solar demand.
It also should be pointed out that if high-end manufacturers like Trina Solar and Yingli Green Energy are expecting lower sales and margins, then manufacturers like LDK (NYSE: LDK) and JA Solar (Nasdaq: JASO) could be in real trouble.
The shakeout is coming
It's worth pointing out that in a recent interview Trina Solar's CEO predicted that the solar industry would go through a major shakeout over the next four years resulting in only a handful of prominent players. Bankruptcies and acquisitions would drive the industry, and he thinks that only five companies would survive through 2020.
This echoes the shakeout in the industry I've been predicting for some time now. Check out my article on companies that could potentially fail and who I think the winners are.
Keep up on what my fellow Fools and I have to say about solar by adding these stocks to My Watchlist, and My Watchlist will find all of our Foolish analysis on solar stocks.
- Add Yingli Green Energy Holding to My Watchlist.
- Add Trina Solar to My Watchlist.
- Add SunPower to My Watchlist.
- Add ReneSola to My Watchlist.
- Add LDK Solar to My Watchlist.
- Add JA Solar Holdings to My Watchlist.
- Add First Solar to My Watchlist.
