ASTI Ascent Solar Technologies Inc (PK)

Before markets opened today, ReneSola Ltd. (SOL) reported first quarter 2012 results. In the reported quarter, the company clocked adjusted loss per American Depositary Share (ADS) of 47 cents per share, missing the Zacks Consensus Estimate of 30 cents of loss per ADS. Numbers, however, were way behind than the year-ago quarterly earnings of 49 cents per share.

Operational Results

In the reported quarter, ReneSola’s revenues of $211.5 million plummeted 41.1% from $359.2 million in the year-ago quarter and rose 12.7% from $187.7 million in the sequentially preceding quarter.

Revenues increased quarter over quarter, with a decrease in the average selling price ("ASP") of solar wafers and modules to 33 cents per watt and 84 cents per watt, respectively, offset by an increase in solar wafer shipments. Revenue in the reported quarter, however, comfortably beat the Zacks Consensus Estimate of $187 million.

In the reported quarter, ReneSola’s product shipments were 466.0 MW versus 339.9 MW in the fourth quarter of 2011 and 330.4 MW in the year-ago quarter. In the reported quarter, solar wafer and module shipments were 375.1 MW and 90.9 MW, respectively.

The sequential increase in solar product shipments was the result of strong demand from European markets, particularly Germany.

ReneSola digested a gross loss of $8.0 million compared with $43.4 million of gross loss in the fourth quarter of 2011 and $101.2 million of gross profit in the year-ago quarter. The sequential decrease in gross loss was primarily due to lower costs and improved margins on the company's solar products. This was partially offset by an inventory write-down of $12.2 million, primarily as a result of the decline in the price of polysilicon.

Overall, ReneSola recorded a net loss of $40.2 million compared with a net income of $43.3 million in the year-ago quarter.

Financial Condition

As of March 31, 2012, ReneSola had cash and cash equivalents plus restricted cash of $388.3 million, compared with $437.4 million at the end of the fourth quarter of 2011. Total debt was $800.8 million, compared with $715.6 million at the end of the fourth quarter of 2011.

Short-term borrowings were $662.6 million, an increase from $570.9 million at fiscal-end 2011. Capital expenditures were $45.0 million in the reported quarter.

Guidance

ReneSola, for the second quarter of 2012, expects total solar wafer and module shipments to be in the range of 460 MW–480 MW. Of this, module shipments are expected to be in the range150 MW–170 MW. Revenue for the second quarter is expected to be in the range of $200 million–$220 million with positive gross margins.

For the full year 2012, the company's outlook is unchanged, with total solar wafer and module shipments expected to be in the range of 1.8 GW–2.0 GW.

Our Take

Based out of China, ReneSola is a leading global manufacturer of solar wafers and producer of solar power products. Capitalizing on proprietary technologies, economies of scale, high production quality, and technological innovations and know-how, ReneSola leverages its in-house virgin polysilicon and solar cell and module production capabilities to provide its customers with solar wafer products and processing services. The company possesses a global network of suppliers and customers.

ReneSola plans to increase its module production capacity to 1.2 GW for modules by the end of the second quarter of 2012. In the reported quarter the company's total module manufacturing cost was approximately 74 cents per watt. The company expects total module processing cost to decrease to below 70 cents per watt for the ongoing quarter.

ReneSola is now producing high-efficiency Virtus wafers with a conversion efficiency of 18.2%. The company's blended non-silicon wafer processing cost was 19 cents per watt in the reported quarter, a decrease from 20 cents per watt sequentially.

Going forward, the successful execution of the company's cost-reduction strategies should allow the company to reduce its blended non-silicon wafer processing cost to 17 cents per watt by the end of the ongoing quarter and to 15 cents per watt by the end of fiscal 2012.

However, ReneSola’s fortunes have been impacted by the industry-wide oversupply glut leading to sharply falling Average Selling Prices, tepid module demand in Europe, and rising competition in the market. Given the industry-wide high inventory level, we advise investors not to take any position in the short-term Zacks #5 Rank (Strong Sell) stock ReneSola. Over the longer run we maintain our Neutral recommendation on the stock.

In the near term we would advise investors to focus on its Zacks #2 Rank (Buy) peer Ascent Solar Technologies Inc. (ASTI).

 
ASCENT SOLAR TE (ASTI): Free Stock Analysis Report
 
RENESOLA LT-ADR (SOL): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research