Thursday, May 19, 2011

Yingli Green Energy (NYSE: YGE): Q1 Earnings Preview 2011

Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) is scheduled to release its first-quarter earnings before the opening bell on Friday, May 20, 2011. Analysts, on average, expect the company to report earnings of 39 cents per share on revenue of $573.46 million. In the year ago period, the company reported earnings of 18 cents per share on revenue of $358.92 million.

Yingli Green Energy Holding Company Limited is a vertically integrated photovoltaic (PV) product manufacturer. The Company designs, manufactures and sells PV modules, and designs, assembles, sells and installs PV systems.

In the preceding fourth-quarter, the Baoding, China based company's net income was $84 million, or 52 cents per American Depositary Share (ADS), compared with a loss of $6.6 million, or 4 cents per ADS. On an adjusted basis, the company earned 57 cents per ADS in the fourth quarter. Revenue jumped 65 percent to $616.1 million from $370.77 million in the same quarter last year. Analysts, on average, expected the company to report earnings of 44 cents per share on revenue of $544.36 million.

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. US President Barack Obama has called for 80 percent of the nation's electricity to come from clean sources by 2035. Meanwhile, China has doubled its target for installed photovoltaic power capacity over the next five years to 10 gigawatt by 2015. The government has also raised its installed solar capacity target for 2020 to 50 GW, up from the previous goal of 20 GW.

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.

However, the solar industry relies on government incentives to make electricity created by the sun competitive with sources such as coal and natural gas. Many governments, particularly in Europe, have implemented generous subsidies for solar power in recent years as they seek to reduce their reliance on fossil fuels and combat climate change. Late in February, German lawmakers passed a law, cutting solar power subsidies by up to 15 percent from this summer, six months ahead of schedule, dealing a blow to the world's biggest photovoltaic market. Similarly, Italy’s government recently approved a decree that reduces incentives to solar projects. The Italian solar market became the second-largest in Europe following Germany last year after the government offered the highest feed-in tariffs in the region.

The company recently revised its shipment outlook for first-quarter 2011. The company now anticipates shipments to decline sequentially compared to its earlier guidance of a sequential rise. It also trimmed the gross margin outlook. Yingli Green Energy expects to report that shipment in the first quarter decreased by a low teen percentage from the fourth quarter 2010, and gross margin will be in the estimated range of 27% to 27.5%. This compares to the Company's previously provided guidance for the first quarter of 2011 that shipment would increase by mid-single digit percentage quarter over quarter and gross margin would be in the range of 30% to 31%.

The company said that it expects a lower shipment compared to the previous quarter primarily due to the policy change in Italy. In addition, the severe weather conditions in Germany this past winter also had a negative effect on the market demand for solar products in the first quarter of 2011. The Company expects to deliver certain of the delayed orders in the second quarter of 2011 and estimates that shipments in the second quarter of 2011 will increase by more than 30% over the first quarter of 2011. The company also reaffirmed its PV module shipment target to be in the estimated range of 1,700 MW to 1,750 MW for fiscal year 2011, which represents an increase of 60.1% to 64.8% compared to fiscal year 2010.

Full Disclosure: None.
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