JA Solar Earnings: An Early Look

Earnings season is just about over, with almost all companies already having reported their quarterly results. But there are still a few companies left to report, and JA Solar (NASDAQ: JASO) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

The solar industry has suffered for years under intense competition and falling subsidies among cash-strapped governments across the globe. JA Solar in particular has had massive losses over that timeframe. Can the solar company recover? Let's take an early look at what's been happening with JA Solar over the past quarter and what we're likely to see in its quarterly report on Monday.

Stats on JA Solar

Source: Yahoo! Finance.

Will JA Solar shine or go dark this quarter?
Over the past few months, analysts have actually had mixed views of JA Solar. They've gotten a lot more pessimistic about the just-ended quarter, widening earnings-per-share loss estimates by $0.25. But for fiscal 2013, they've narrowed their consensus loss by a full $1 per share in just the past week. The stock has shared that enthusiasm in part, rising 5% since mid-December despite having fallen back from loftier gains more recently.

After years of losses, the solar industry is now starting to see its problems come to a head. JA Solar rival Suntech Power (STP) defaulted on its bonds earlier this week, representing the first time that a Chinese solar company has had a default and forcing bondholders to go to court to try to reorganize the company. Although the Chinese central government isn't likely to bail out Suntech, local governments might help Suntech, as a similar bailout for LDK Solar (NYSE: LDK) came from local sources.

With JA Solar having convertible bonds come due in just two months, it could face some of the same challenges, although JA Solar's balance sheet is fairly healthy by industry standards and might actually benefit from Suntech's exit. That may be behind analysts' long-term upgrade of their 2013 consensus. Moreover, recent news that JA Solar started shipping components on a 35-megawatt Israeli solar project may have boosted optimism about the company's continued viability.

In its earnings report, watch to see if JA Solar manages to keep its gross margins positive. With only so much cash to burn, JA Solar needs the consolidation among Chinese solar companies to happen sooner rather than later in order to get itself into a competitive position in which it can stand up to U.S. solar giant First Solar and the rest of the industry.

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