With the upcoming rush of solar earning over the next several weeks, our Q4 earnings estimates are posted below. At this stage, the actual numbers will not have a lot of bearing on stock prices. The most important information from the conference calls will be the outlook for Q1 and the rest of 2012.
The 11 solars discussed in this article are listed below:
- Canadian Solar Inc. (CSIQ)
- China Sunergy Co., Ltd. (CSUN)
- Daqo New Energy Corp. (DQ)
- Hanwha Solarone Co., Ltd. (HSOL)
- JA Solar Holdings Co., Ltd. (JASO)
- Jinko Solar Holding Company Limited (JKS)
- LDK Solar Co. Inc. (LDK)
- Renesola LTD (SOL)
- Suntech Power Holdings Co., Ltd. (STP)
- Trina Solar Limited (TSL)
- Yingli Green Energy Holding Co. Ltd. (YGE)
Our Q4 Estimates Versus the Street Estimates | |||
Stock | Our Estimates | Street Estimates | % DIFF |
CSIQ | -0.22 | -0.41 | 47 |
CSUN | -0.63 | -1.20 | 47 |
DQ | -0.16 | -0.08 | -101 |
HSOL | -0.15 | -0.28 | 45 |
JASO | -0.11 | -0.10 | -10 |
JKS | 0.01 | -0.39 | 101 |
LDK | -0.27 | -0.66 | 58 |
SOL | -0.17 | -0.27 | 36 |
STP | -0.39 | -0.34 | -15 |
TSL | -0.36 | -0.39 | 8 |
YGE (see Note 2) | -0.35 | -0.19 | -87 |
Note 1 - The Street estimates are based on the numbers posted by Yahoo as of February 21 2012.
Note 2 - YGE including one time charges will officially post a loss of about $3.70 per share.
Should any of the solars provide quarterly revisions, I will post updated quarterly results in the comment section below.
Readers will note that JKS is the only company with a possible profit for Q4. This number does not carry a high level of confidence. Also, it should be noted that based on JKS projections for Q1, it will most likely suffer a loss for Q1.
YGE and CSIQ Revisions for Q4
On February 21, YGE and CSIQ posted some interesting revisions for Q4. YGE basically blew-up an already bad quarter by throwing in some astounding write-downs and reduction in sales for Q4. This move should help it clean up the company earnings outlook for 2012.
I was surprised at the $361 million impairment charge related to the poly plant. During 2011, the company seemed to be having problems with ramping up production. With its processing cost roadmap, it appeared that the company could lose about $17 million for 2012 on the poly plant as a fully operational cost center.
In an accounting sense, an impairment should reflect the amount an asset has fallen in value. If this is a write-down to zero, then what does this mean? Of course, the worst case is that the company has totally bungled the plant and the poly plant is toast. Putting it mildly, if the plant were toast, then that would reflect badly on management.
CSIQ, on the other hand, provided some surprisingly positive revisions. The shipment revision for Q4 is the exact opposite of YGE. In YGE's defence, it may have decided that since it was blowing up everything, it might manage some sales into Q1.
Summary
As stand-alone numbers, the Q4 numbers are terrible. However, nine of the 11 solars are showing potentially improving EPS numbers over Q3.
Q4 EPS Estimates and Comparison to Q3 EPS | |||
Q3 | Q4 | % | |
Stock | Actual | Estimate | Difference |
CSIQ | -1.02 | -0.22 | 79 |
CSUN | -0.78 | -0.63 | 19 |
DQ | 0.34 | -0.16 | -147 |
HSOL | -0.33 | -0.15 | 54 |
JASO | -0.36 | -0.11 | 69 |
JKS | -1.86 | 0.01 | 100 |
LDK | -0.87 | -0.27 | 68 |
SOL | -0.09 | -0.17 | -93 |
STP | -0.64 | -0.39 | 39 |
TSL | -0.45 | -0.36 | 20 |
YGE | -0.18 | -0.35 | -97 |
Investors should maintain extreme caution as it appears that eight of the 11 solars will continue to post losses for Q1. As mentioned in the past, if module ASPs remain below 95 cents for 2012, then most of the solars will post losses for the full year of 2012. Unfortunately, even at $1, five of the solars could post full year losses.
Notes to the Tables
As we go further out from the current quarter estimates, the chance for greater variations from the actuals could increase greatly and the variations could be magnified by unexpected events. One example would be changes in the euro versus the US dollar. Using the latest information, these are our best estimates to date. We will update these numbers each quarter with new information impacting our solars.
Due to the extreme module pricing volatility, our results could vary greatly with actuals.
Estimates may or may not be based on company guidance. We approach each quarter based on many factors including guidance, company history of sandbagging, maximum quarterly production and general supply and demand environment for solar products.
Our general approach is to start from scratch and build up the estimates. We do not start from company guided gross margin numbers and revenue or shipment numbers. We may crosscheck on those metrics. This is analogous to a chef purchasing a soup stock versus making soup stock from scratch.
In general, our estimates do not include one-time entries such as forex gains or losses.
Disclosure: I am long JKS, LDK, YGE.
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