The largest U.S. solar panel manufacturer,
First Solar Inc.
), not only reported disappointing fourth quarter 2013 results
but also came up with weak first quarter guidance. This dealt a
huge blow to investor confidence, leading to a 12% plunge in its
share price in after-hours trading on Feb 25 and over 9% the
This solar giant reported fourth quarter earnings of 89 cents per
share, which missed the Zacks Consensus Estimate by 11% and came
in 56.4% lower than the year-ago earnings. Revenues also plunged
29% year over year to $768.4 million and fell short of the Zacks
Consensus Estimate of $974 million. Lower business project
revenue was the primary reason for this huge miss.
First Solar's numbers look particularly wan in contrast to a
solar energy largely on the mend after two years of a punishing
downturn. Presently, China, Japan and the U.S are driving demand
for solar panels. Solar majors -- comprising polysilicon
manufacturers and panel makers -- active in Asia are expected to
gain traction as the industry oversupply shrinks.
Solar is now a global phenomenon and the industry can no
longer be regarded as a niche sector. It is breaking out as the
most happening thing in energy today.
Notably, 2013 showed astounding scale in the Chinese market,
overtaking longtime leader Germany. This year, solar developers
around the globe are expected to install record capacity as a
booming Chinese market drives growth.
Moreover, the U.S. Energy Information Administration projects
that U.S. solar energy consumption will rise by roughly 35% in
2014. The increase in demand is likely to fuel top-line growth at
the solar manufacturers.
In spite of First Solar's earnings debacle, we believe the
momentum is intact for the solar sector with the preeminent
stocks continuing with their forward march in 2014. Below we have
hand- picked two solar stocks that have the potential to give a
solid return in the near term, if the sector dynamics remains
JinkoSolar Holdings Co.
This Zacks Ranked #1 (Strong Buy) China-based company specializes
in low-cost production and supply of solar panels with operations
across Europe, North America and Asia. A vertically-integrated
firm with a global focus could be a great pick in the solar
space. JinkoSolar is strategically balanced to take advantage of
China's flourishing solar industry as well as other emerging
The company has also displayed an impressive earnings trajectory
following a disastrous Dec 2012 quarter. The 330% miss in the
said quarter is now a thing of the past. JinkoSolar has delivered
positive earnings surprises in the last three quarters with an
emphatic average beat of 418.3%. Specifically, in its last
reported quarter, the company exceeded the Zacks Consensus
Estimate by more than 280.0%.
This stock trades at a descent 9.37x forward earnings. It has a
price-to-book (P/B) ratio of 2.22, which is below the industry
average of 3.2. Along with that its price-to-sales (P/S) multiple
is 0.8 (the industry average is 1.7). JinkoSolar's share price
gained 350% last year as the market regained confidence in the
stock backed by its operational excellence. The company is
scheduled to reports its fourth quarter 2013 earnings on Mar 3,
Trina Solar Ltd.
Trina Solar - another Chinese manufacturer of photovoltaic
modules - is a Zacks Rank #2 (Buy) stock.
After eight straight quarters in the red, Trina Solar returned to
profit in the third quarter of 2013, a turnaround driven by
impressive trade in panel shipments. Panel shipments doubled year
over year to reach 774.6 megawatt (MW), propelling revenues
higher by 84% to $548.4 million.
Rising Asian demand, China in particular, has helped the
industry's main players like Trina Solar to maintain steady
margins. China reportedly increased the 2014 target for new solar
PV capacity installations to 14 gigawatt (GW) from its previous
forecast of 12 GW. If that's so, the country is expected to
account for a sizeable share of Trina Solar's total shipments
The company - which is scheduled to report its fourth quarter
earnings on Mar 4 - has a forward P/E of 29.8x. On P/B and P/S
basis, the stock trades at 1.47x and 0.76x, respectively, which
are lower than the industry averages.
The stock has rallied 205.1% last year.
In the wake of environmental concerns, alternate energy sources
are gradually gaining prominence worldwide. The universal
availability of sun rays, decreasing cost of photovoltaic units
and a higher conversion rate make solar power technology one of
the most popular alternate energy resources. Make hay while the
sun shines and add these two solar stocks to your portfolio.
FIRST SOLAR INC (FSLR): Free Stock Analysis
JINKOSOLAR HLDG (JKS): Free Stock Analysis
TRINA SOLAR LTD (TSL): Free Stock Analysis
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