On Wednesday, Trina Solar Limited (ADR) (NYSE:TSL) will release its latest quarterly results. Given all the issues that have plagued the solar industry lately, can the company get past its lack of profitability to survive the shakeout among Chinese solar companies?
Recently, Chinese solar stocks have been extremely volatile, as a glut of supply and weak pricing conditions have finally started to cause debt defaults and other financial challenges among the industry’s weaker players. The question Trina and its rivals face is how to survive long enough to reap the benefits of a potential rebound in the industry in the future. Let’s take an early look at what’s been happening with Trina Solar Limited (ADR) (NYSE:TSL) over the past quarter and what we’re likely to see in its quarterly report.
Stats on Trina Solar
|Analyst EPS Estimate||($0.72)|
|Revenue Estimate||$292.77 million|
|Change From Year-Ago Revenue||(16.3%)|
|Earnings Beats in Past 4 Quarters||0|
Will Trina light up its earnings this quarter?
So far, analysts’ optimism about Trina in recent months has been limited to the long-term outlook. Although they’ve narrowed their loss estimates for the full 2013 and 2014 years, they’ve widened their expected losses for the March quarter by $0.06 per share. Yet the stock has soared in anticipation of better times ahead, gaining more than 50% since the end of February.
Most of the move in Trina Solar Limited (ADR) (NYSE:TSL)’s stock has come in just the past month, as two trends have really taken hold since April. First, U.S. companies First Solar, Inc. (NASDAQ:FSLR) and SunPower Corporation (NASDAQ:SPWR) have given rosy projections of their respective future prospects, as First Solar aims to improve its panels’ efficiency through its acquisition of TetraSun, and SunPower has benefited from its industry-leading efficiency in boosting its profits. In addition, with the bond default earlier this year by Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP), some believe that the Chinese government might allow weaker Chinese players to fail, which could potentially lead to reduced production and end what has been a crippling supply glut that has weighed on prices around the world.
But Trina gave a troubling update to its quarterly guidance a couple weeks ago, saying that it shipped 390-400 megawatts of solar modules during the quarter, down from its original 420-430 megawatt estimate. With gross margins of just 1% to 3%, Trina Solar Limited (ADR) (NYSE:TSL) isn’t faring as badly as peer ReneSola Ltd. (ADR) (NYSE:SOL), which posted negative gross margins in its quarterly report earlier this month. Yet Trina still isn’t making enough money to come close to profitability in the near future.
Another big obstacle to Trina Solar Limited (ADR) (NYSE:TSL) and its Chinese peers has come from trade restrictions. With Europe seen potentially joining the U.S. in imposing tariffs on Chinese imports, there’s a real possibility that Trina will get priced out of one of its most important markets.