Friday, November 12, 2010

Suntech Power Holdings Co. (NYSE: STP): Q3 Earnings Preview 2010

Suntech Power Holdings Co. (NYSE: STP), China's largest solar panel maker, is scheduled to release third-quarter earnings before the opening bell on Wednesday, November 17, 2010. Analysts, on average, expect the company to report earnings of 23 cents a share on revenue of $713.08 million. In the year ago period, the company reported earnings of 16 cents per share on revenue of $473.11 million.

Suntech Power Holdings Co. engages in the design, development, manufacture, and marketing of photovoltaic products worldwide and its products include monocrystalline and multicrystalline silicon PV cells; PV modules; and building-integrated photovoltaics products.

In the preceding second-quarter, the Wuxi, China-based company's net loss was $174.5 million, or 97 cents per American Depository Share or ADS, compared with a year-ago profit of $9.6 million, or 6 cents per ADS. On an adjusted basis, the company earned 3 cents per ADS in the second quarter. Revenue nearly doubled to $625.1 million from $321 million. Analysts, on average, expected a profit of 3 cents per ADS on revenue of $622.3 million.

At its last last earnings call in August, the company boosted its 2010 shipment target of PV products from 1.3 gigawatt to more than 1.5 gigawatt, citing continued strong demand.  The company is targeting 1.8 gigawatts of cell and module capacity by the end of 2010. The company also said that it expects to more than quadruple its sales to the North American market and secure close to 20% market share in 2010.

The company is rapidly expanding its presence in the United States. Last month, the company opened its first U.S. manufacturing plant in Goodyear, Arizona. All modules produced at the facility will be compliant for procurement in American Recovery and Reinvestment Act (ARRA) projects. The new module production facility has an initial 30MW of annual capacity and will employ more than 75 operators, engineers and professionals by the end of 2010. Suntech also said it is already making plans to expand the facility to 50MW early next year due to strong interest from customers and targets to employ more than 150 people by the end of 2011. Suntech plans to expand the facility, in concert with the growing U.S. solar industry, to reach up to 120MW of annual production capacity.

The US solar market is growing significantly and is expected to become the world's second-largest this year, with an estimated annual growth of 42 percent by 2020.

Solar industry as a whole has benefited from continues strong demand due to growing awareness about global warming, skyrocketing oil prices, cheap financing and technological advances. Thanks to better cost advantages, Chinese solar module maker have grabbed more market share from their international competitors. Local solar companies have also benefited from China's well-developed supply chain, cheap electricity, supportive policies and even low environmental standards. 

The company's stock currently trades at a forward P/E (fye 31-Dec-11) of 10.16. In terms of stock performance, Suntech Power shares have lost nearly 45% since the beginning of the year.

Full Disclosure: None.
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