Tuesday, March 1, 2011

Suntech Power (NYSE: STP): Q4 Earnings Preview 2010

Suntech Power Holdings Co. (NYSE: STP), China's largest solar panel maker, is scheduled to release fourth-quarter earnings after the closing bell on Tuesday, March 8, 2011. Analysts, on average, expect the company to report earnings of 29 cents a share on revenue of $843.26 million. In the year ago period, the company reported earnings of 27 cents per share on revenue of $583.62 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 third-quarter, the Wuxi, China-based company's net income was $33.1 million or $0.18 per ADS, compared with a profit of $29.79 million or $0.16 per ADS in the year-ago quarter. Revenue surged 57.2% to $743.67 million from $473.11 million. Analysts, on average, expected a profit of $0.23 per ADS on revenue of $713.08 million.

In December, the company said that it expected to generate revenues of between $2.78 billion and $2.83 billion in fiscal 2010 by shipping more than 1.5GW of solar products. This represents a 64% year-over-year revenue growth. Suntech Power's consolidated gross margin for fiscal 2010 is expected to be about 17%, and operating margin is projected to be about 6.5%. The company also expected to achieve installed cell and module production capacity of 1.8GW and installed wafer capacity of 500MW by the end of 2010."Over the next 12 months, we intend to expand internal wafer capacity to 25% to 50% of our total cell and module capacity. This should enable us to significantly reduce wafer cost, and improve profitability. Going forward, we also plan to leverage Suntech's global R&D resources to drive innovation and efficiency improvements in ingot and wafer manufacturing processes," Chief Executive Dr. Zhengrong Shi said in November.

Early in Februaury, Suntech Power said that prices for its solar panels rose in the fourth quarter from the third quarter. The company also said ythat it expects those prices to remain steady through the first half of 2011. Prices in Europe, the company's largest market, climbed slightly on both a euro-basis and because of gains in the currency there, said Steven Chan, Suntech America's president.

For fiscal 2011, the company anticipates full-year revenues in a range of $3.4 billion to $3.6 billion after shipping at least 2.2GW of solar products. Earnings per American Depositary Share for the year are projected to be in the range of $1.40 to $1.60.

The company is rapidly expanding its presence in the United States. 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. Suntech, which opened its first U.S. panel manufacturing site in Goodyear, Arizona last year, sold 65 MW of panels in North America in December, topping the 55 MW it sold in the region during all of 2009. The company is targeting sales of 500 MW in North America this year, double the 250 MW is sold in 2010.

In January, US President Barack Obama in his State of the Union address called for 80 percent of the nation's electricity to come from clean sources by 2035. Meanwhile, Senator Bernie Sanders submitted a bill to congress titled the "10 Million Solar Roofs and 10 Million Gallons of Solar Hot Water Act". This bill is expected to spur alternative energy growth and create green jobs.

2010 continued the significant growth of the solar market with new markets in China and the USA advancing their demand for solar panels. Solar industry as a whole has benefited from continued strong demand thanks to growing awareness about global warming, skyrocketing oil prices, cheap financing and technological advances. Companies involved in the production of semiconductors used in solar panels have enjoyed a positive quarter. Many have experienced rising shipments over the last few quarters, resulting in a sequence of record quarters. The world is becoming increasingly environmentally conscious. Both commercial and private demand for solar power is rising. Solar options are becoming more attractive as more governments provide better options for buildings producing solar power to feed into and out of the grid as required.

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. More than 90 percent of domestic Chinese manufacturers sell their products overseas currently, especially in Europe, where the solar electricity industry is more mature.

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