Can LDK Solar Survive Against JinkoSolar and Yingli Green Energy?

LDK Solar (NYSE: LDK) will release its quarterly report on Tuesday, and investors are hoping that the Chinese solar company will start to rebound along with many of its peers. Yet while JinkoSolar (JKS -1.10%) and Yingli Green Energy (NYSE: YGE) have seen their shares soar recently as their prospects have improved, LDK Solar still remains with substantial debt that many investors believe it might never be able to pay off.

LDK Solar has faced a hard time in the ultra-competitive Chinese solar industry, with huge numbers of players all scrambling to take advantage of the demand for solar modules and panels around the world. Unfortunately, LDK Solar didn't do as good a job of managing its balance sheet as rivals like JinkoSolar and Yingli, and as a result, it's facing a battle for its survival as it tries to avoid becoming the next company after Suntech Power to resort to extreme measures in order to handle its debt. Can LDK Solar take advantage of the same benefits as its rivals? Let's take an early look at what's been happening with LDK Solar over the past quarter and what we're likely to see in its report.

Stats on LDK Solar

Source: Yahoo! Finance.

When will LDK Solar get back on its feet?
In recent months, analysts have generally been more favorable in their views on LDK Solar earnings, narrowing their third-quarter loss estimates by a nickel per share and their full-year 2014 projections by a dime per share. Unlike Yingli and JinkoSolar, though, LDK Solar's stock hasn't risen and in fact is down 2% since late August.

LDK's problems began a long time ago, and its second-quarter earnings did nothing to stem the tide against the solar company. LDK reported a net loss that exceeded its total revenue by almost half, and the company also said it wouldn't make a payment on almost $200 million in debt that was due in late August. The company has thus far avoided bankruptcy by making arrangements with lenders and taking advantage of uncertainties in Chinese insolvency law, but with $2.8 billion in debt, the company's $115 million in quarterly revenue seems insufficient to pay it off even in the long run.

LDK has made some strategic mistakes that cost it its competitive position. A polysilicon factory has failed to make money for the company, and it also contributed to the debt that has hamstrung its future. By contrast, even though Yingli Green Energy has a similar amount of debt, it has been better able to generate revenue to help maintain that debt. That has also made it easier for Yingli to get assistance from China in the form of financing. JinkoSolar is in even better shape, with a healthier balance sheet that could put it in a strong position to take advantage of troubles at LDK and its rivals.

At this point, few investors have much positive to say about LDK Solar's prospects. With so much overcapacity, the company doesn't have many options for scaling back and refocusing on more profitable areas. Yet it also hasn't demonstrated a strong ability to tap into new markets in an effort to raise margins and become more financially healthy. JinkoSolar and Yingli have proven more nimble in that regard, even though Yingli's reliance on Germany is somewhat troubling.

In the LDK Solar earnings report, watch to see how the solar company expects to deal with its debt and where it's seeking growth. Without a successful set of new initiatives, LDK Solar may never get the day in the sun that its investors have waited for years to see.

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