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Q2 Preview: Lowered Outlook May Bode Well for LDK Solar (LDK)

Shares of China-based PV manufacturer LDK Solar Co., Ltd. ( LDK ) are trading slightly higher Friday ahead of it's second-quarter earnings report, expected out before the market opens Monday.

LDK is expected to report earnings of 43 cents on revenue of $714 million in the quarter. Earnings would be a 19.4 percent gain from last year, but a drop of 55 percent sequentially.

Shares fell 39 percent in the quarter and are down 19.6 percent since. The stocks is 42 percent lower over 2011.

Last quarter, LDK guided for second-quarter revenue of $710 to $760 million, shy of the Street consensus of $771.7 million. Additionally, wafer shipments are expected to be lighter at 500 to 550-MW.

Data from Bloomberg has 3 analysts with a Buy, 12 at Hold, and 5 suggesting to sell. The price target average is $6.30, with a low of $1.00 and high of $7.60.

Analyst Insight

  • Kaufman Brothers sees a loss of 34 cents per share on revenue of $476.2 million. Commenting on the quarter, Kaufman models their results on "lower volumes and considerable pricing declines assumed in all segments...Feed in tariff revisions, particularly in Italy, lower pricing across the supply chain, and current oversupply conditions should all serve to negatively impact quarterly performance and profitability. In contrast to 1Q11, LDK is unlikely to see any windfall benefits from its poly business."

    "However, we believe the company has ramped capacity sequentially to 16,000MT from 12,000MT, with a 60%+ utilization rate and could therefore have sold additional supply at a lower price compared to its contracts or witheld from selling and increased its inventory levels."

  • Wells Fargo sees revs of $480 to $500 million and a loss of 32 cents per share. For the quarter, Wells sees "In our view a turnaround will be predicated on transitioning the business model to panels given very low wafer profitability; selling 750 to 800MW of panels would represent a 9 percent share for a new vendor, not an easy feat in an oversupplied market. LDK also previously announced it would spin out its poly plant to help recap the balance sheet; however, a spinout looks challenging in a poor equity market and given concerns poly pricing could fall much faster than panel/wafers in 2012."

  • Collins Stewart sees a loss of 39 cents per share and revenue of $480 to $500 million. On guidance and outlook, Collins says, "We expect the operating loss in 2Q11 will negatively impact LDK's operations and finances in the quarters ahead. Its operations will be negatively impacted by questions that will arise about its sustainability. If bankability is challenged, module shipments will suffer. Its ability to secure short-term debt financing will become more difficult if it is reporting losses. Rolling over its $1.5B of short term debt more difficult in the quarters ahead."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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