ReneSola Swings to Profit After 2 Yrs, Beats Ests (Revised) - Analyst Blog

The photovoltaic manufacturer ReneSola Ltd SOL reported its first quarterly profit in the fourth quarter 2013 following ten quarters of reporting in the red. This was backed by record solar module shipments.

ReneSola reported earnings per American Depositary Share ADS of 1 cent in the fourth quarter of 2013, beating the Zacks Consensus Estimate of a loss of 11 cents per ADS. The company has also been able to swing to profit from its year-ago quarterly loss of $1.03 per ADS and the prior quarter loss of $2.23 per ADS.

In 2013, the company incurred loss per ADS of $2.85, wider than the Zacks Consensus Estimate of a loss of 78 cents and the year-ago loss of $2.81 per ADS.

Following two years of downturn, solar panel prices have increased in recent quarters, enabling major solar products manufacturers to return to profitability. This Chinese solar panel maker had initiated an effort last year to upgrade a polysilicon factory in Sichuan and integrate it with a more advanced facility while cutting down on costs. The success of the fourth quarter speaks of the company's efforts to enhance its brand recognition as well as market share in international markets. The company has become one of the top module suppliers in the U.S., Europe and Japan.

Operational Results

ReneSola's net revenues of $438.8 million advanced 43.2% from $306.5 million in the prior-year quarter and 4.7% from $419.3 million in the sequentially preceding quarter, supported by increased shipments. The reported figure also beat the Zacks Consensus Estimate of $384.0 million by 14.3%. In 2013, net revenue surged 56.8% year over year to $1,519.6 million. With this it beat the Zacks Consensus Estimate of $1,465.0 million.

During the quarter under review, total solar wafer and module shipments were 784.1 megawatt (“MW”), up 10.0% year over year but down 7.9% sequentially. Its module shipments were 505.3 MW, up a considerable 57.7% year over year and 9.2% sequentially.

In 2013, total solar wafer and module shipments jumped 42.4% to 3,146.5 MW. The company continued to grow its module business while focusing more on the geographic diversification of its sales.

Operating expenses increased 15.3% year over year but decreased 81.7% sequentially to $39.2 million during the quarter.

Operating income during the quarter was $8.2 million as compared to operating losses of $23.8 million in the fourth quarter of 2012 and $180.3 million in the third quarter of 2013.

Financial Condition

As of Dec. 31, 2013, ReneSola had cash and cash equivalents plus restricted cash of $86.8 million, compared with $93.3 million as of Dec. 31, 2012. Net cash outflow from operating activities was $29.3 million in fourth quarter 2013 compared with net cash inflow of $79.6 million in the third quarter of 2013. Total debt was $742.6 million in 2013 compared with $831.2 million as of 2012.

Guidance

The company expects first quarter 2014 total solar module shipments between 500 MW and 520 MW, with overall gross margin in the range of 9% to 11%.

Full-year 2014 solar module shipments are forecast between 2.3 gigawatts (GW) and 2.5 GW.

At the Peers

The largest solar-cell producer by capacity, JA Solar Holdings Co. Ltd. JASO reported its first quarterly profit in the fourth quarter of 2013 following ten quarters of losses. The company's fourth quarter 2013 adjusted earnings came in at 16 cents per ADS, handily beating the Zacks Consensus Estimate of a loss of 3 cents. JA Solar had incurred a loss of $2.65 in the year-ago quarter.

Solar cell manufacturer Canadian Solar Inc. CSIQ reported earnings of 39 cents per share in the fourth quarter of 2013 as against a loss of $2.43 per share in the year-ago quarter. The bottom line, however, came in below the Zacks Consensus Estimate of 49 cents by 20.4%.

JinkoSolar Holding Co. Ltd. JKS reported fourth quarter 2013 results with adjusted earnings per ADS of $1.28 (adjusted earnings of 32 cents per share) coming in ahead of the Zacks Consensus Estimate of 86 cents. The company reversed its year-ago adjusted loss per ADS of $5.06 (adjusted loss $1.26 per share) in the reported quarter.

Our Take

Chinese solar product manufacturers, like ReneSola, are speeding up their domestic operations with the government becoming more and more stringent on environmental issues. The electricity generators are implementing new measures to bring down emission levels of greenhouse gases. At present, nearly 70% of China's electricity is generated from coal-fired power plants. The country is taking active steps to idle the high operating cost coal mines. China aims to double its generating capacity by 2030, with half of all new plants having renewable sources of power. China is anticipated to install up to 14 GW of solar power this year which will boost ReneSola's growth momentum.

ReneSola presently carries a Zacks Rank #3 (Hold). Other better-placed solar players include Zacks Ranked #1 (Strong Buy) Canadian Solar and Zacks Ranked #2 (Buy) JinkoSolar Holding.

(We have revised this article to correct a mistake. The previous version should not be relied upon.)