North Coast Solar Stocks

May 22, 2009

Solar shares fall on weak 1Q, outlook

Filed under: LDK, SOL, STP — Tags: , , , , , , — Jason @ 12:03 pm

Shares of solar companies drop following bleak 1st-qtr results, sector outlook

Friday May 22, 2009, 12:03 pm EDT

NEW YORK (AP) — Solar stocks sank Friday after a host of companies in the sector posted disappointing first-quarter results and bleak forecasts.

Suntech Power Holdings Co. Ltd. (STP) on Thursday posted a profit of $1.8 million, or a penny per ADS, on revenue of $315.7 million, beating Wall Street expectations of a loss of 6 cents per ADS on revenue of $350.9 million.

Despite Suntech’s upside surprise, Merriman Curhan Ford analyst Craig Irwin expressed concerns over the “quality” of these results, as revenue included $100 million from shipments in late March to the company’s affiliate Global Solar Fund.

“We believe the revenue recognition accounting on shipments to GSF merits a closer look,” said Irwin, noting that SunTech owns 86 percent of the equity in GSF and Suntech’s chief executive owns 10 percent with the balance owned by unnamed investors. Irwin rates SunTech’s stock “Sell.”

Jefferies & Co. analyst Paul Clegg called this move “aggressive accounting,” noting it allows sales to GSF to be booked as revenue, without elimination on SunTech’s financials.

“Given the ownership structure, we think ‘consolidation’ might be more appropriate and that the materiality of the relationship could cause investor concern that SunTech could influence the timing of shipments,” Clegg said. Clegg rates the company “Hold.”

Suntech said it expects revenue growth in the second quarter and full-year shipments in the range between 600 megawatts to 700 megawatts, which reflects a constrained financing environment and the challenges in predicting whether demand will rebound.

On Friday SunTech priced its offering of 20 million American Depositary Shares, along with 3 million additional ADSs for the underwriter, at $12.50 per ADS, a 7 percent discount from its Thursday closing price of $13.47.

Irwin said this offering lowers the company’s balance sheet risk, giving it the flexibility to repay debt.

Shares of the China-based solar module maker fell 64 cents, or 4.8 percent, to $12.84.

LDK Solar Co. (LDK) on Thursday fell to a first-quarter loss of $22.5 million, or 21 cents per ADS on revenue of $283.3 million. Analysts polled by Thomson Reuters expected a more modest loss of 7 cents per share on $240 million in revenue.

Lazard Capital Markets analyst Sanjay Shrestha downgraded the China-based company to “Sell” from “Hold,” citing its stressed debt position, continued weak operational performance and the “likelihood that it will not be able to generate adequate margins in a continued declining polysilicon pricing environment with potential for additional write-downs.”

LDK Solar shares tumbled in midday trading, falling $1.28, or 13.8 percent, to $8.03.

Elsewhere in the sector, ReneSola Ltd. (SOL) on Thursday reported a first-quarter loss, driven mainly by write-downs on the value of inventory, and cut its 2009 revenue outlook.

The China-based company posted a quarterly loss of $30 million, or 22 cents per share, disappointing analysts who estimated a profit of 1 cent per share, on average.

ReneSola signaled that revenue levels will continue to struggle when it slashed its full-year revenue estimate to between $500 million and $550 million from its March outlook of between $650 million and $700 million. The company said its wafer shipments for the year are expected to range between 450 megawatts and 500 megawatts, down from earlier estimates between 620 megawatts and 670 megawatts.

Analysts predicted a full-year profit of 41 cents per share on revenue of $585.7 million, on average.

Shares of ReneSola fell 16 cents, or 4 percent, to $3.81.

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