Solar earnings season is here, and solar stocks have continued their hot start to 2012. Across the board, solar stocks are up significantly.
After a few relatively quiet weeks as companies prepared fourth-quarter earnings, finally some numbers began to trickle out Friday. And as I've predicted, they're much better than expected.
Here are some of the highlights of the week in solar.
An earnings flood begins
Suntech said Q4 shipments will fall 10% from a previous expectation of a 20% decline in shipments. Revenue is expected to be $610 million to $630 million, and gross margin expectations haven't changed at 9% to 11%.
Suntech also said that inventory and accounts receivable will be down significantly, an indication that manufacturers were able to sell off some of the inventory that piled up in recent quarters. Overcapacity in the industry was one of the main drivers of falling sales prices, and now that prices are low enough to attract more installations, inventory is flying off the shelves.
Good news for Suntech probably means strong results from top-tier Chinese suppliers Trina Solar
Infighting in the industry
SunPower got angry this week. The company sued solar installer SolarCity over allegedly stolen intellectual property. According to SunPower, whose complaint was very specific, employees who left SunPower for SolarCity took confidential data, including customer information.
Considering the specific nature of SunPower's documents, including names, email dates, and accusations that personal USB drives were used, the charges seem convincing on the surface. I doubt that more than a settlement will take place, but it's an interesting development from two companies fighting to take hold of the residential and commercial solar market.
Another one bites the dust
I hate to say I told you so, but I did say in an article last May that Energy Conversion Devices was on its last leg. This week, that leg finally gave out, leaving the company limping into bankruptcy court. This is just another in a string of bankruptcies that show just how important product efficiency and costs are in the solar industry. Energy Conversion Devices was always one of the least efficient manufacturers in solar and never seemed to be able to post positive margins.
The company said its solar products will live on, but I have serious doubts about that.
Beneath the headlines
Here are some of the smaller stories of the week.
said it supplied 23 MW of modules to a utility-scale project in Lingwu, China. The project qualifies for China's new feed-in tariff program and shows some of the company's ability to build large solar projects. (Nasdaq: JASO)
- The 1603 Treasury Program was put back on the table in President Obama's budget this week, two months after Congress let the program lapse. Obama appears to be trying to double down on solar, which should be good for investors.
- Trina Solar announced a $100 million term loan, which will be used to add about 500 MW of high-efficiency Honey cell and module capacity.
- First Solar said it has resolved permitting issues that led to a delay in a Department of Energy loan guarantee. The stock fell more than 10% when the issue first came up, so this news helped push the stock higher Friday.
Can this run continue?
I'm not sure how long solar stocks can stay hot, but I'll enjoy the ride while it lasts. Germany, for one, has yet to announce a modification to its feed-in tariff program, which could put a damper on demand in the middle of the year.
I'm holding my long positions but am not adding to them right now after the strong run up. I'd wait for a pullback on bad news and jump into high-quality names such as SunPower, Yingli Green Energy, and Trina Solar.
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Fool contributor Travis Hoium owns shares of First Solar as well as SunPower in his personal account and an account he manages. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.
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