For Immediate Release
Chicago, IL – November 19, 2010 – Zacks.com Analyst Blog features: Network Appliances Inc. (NTAP), VMware Inc. (VMW), Suntech Power Holdings Company Ltd. (STP), JA Solar Holdings Co. Ltd (JASO) and ReneSola Ltd. (SOL).
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Here are highlights from Thursday's Analyst Blog:
NetApp Beats Again
Network Appliances Inc. (NTAP) reported second quarter fiscal 2011 adjusted earnings per share (EPS) of 45 cents, exceeding the Zacks Consensus Estimate of 39 cents. Adjusted EPS excludes amortization of intangible assets, acquisition related expenses, non-cash interest expense as well as investments and tax gains, but includes stock-based compensation expenses.
During the quarter, NetApp launched new solutions, enhanced customer satisfaction by providing advanced IT infrastructure and extended its partnership program with VMware Inc. (VMW) and Fujitsu. This led to a significant revenue growth during the quarter, which, along with operating leverage, resulted in promising quarterly earnings. Shares were up 1.73% after hours in response to the news.
Revenue
NetApp reported second quarter revenues of $1.21 billion, up 32.6% from $910.0 million in the year-ago quarter. Revenues also exceeded the Zacks Consensus Estimate of $1.19 billion and were in line with the higher end of the company's guidance range. While product revenues witnessed the most significant increase, other segments also improved on a year-over-year basis.
Product revenues were $780.0 million in the quarter, up 48.6% from $525.0 million reported in the year-ago quarter and accounted for about 64.6% of total revenue. The improvement was due to successful product launches during the quarter.
Software Entitlement & Maintenance revenues in the quarter were $177.9 million, up 4.8% from $169.8 million reported in the year-ago quarter. The segment's revenues represented around 14.7% of total revenue.
Service revenues were $249.5 million in the quarter, up 16.0% from $215.1 million reported in the year-ago quarter. The segment accounted for 20.7% of total revenue.
Guidance
NetApp expects third quarter 2011 revenues in the range of $1.24 billion to $1.29 billion, representing a 3% to 7% sequential growth and approximately 23% to 28% year-over- year growth. GAAP EPS is expected to range between 39 cents and 41 cents, while non-GAAP EPS is expected to be in the range of 48 cents to 50 cents. The company also expects shares outstanding to be approximately 408 million. NetApp commented that the third quarter forecasts are somewhat conservative, given slowing business trends from Europe.
Our Take
The quarter's results were encouraging, with both revenues and earnings per share exceeding Zacks Consensus Estimates. We believe that the momentum will continue based on revenue growth trends, strong partnership programs and increasing IT spending.
Suntech Posts Lower Profits
Suntech Power Holdings Company Ltd. (STP) posted 18 cents of earnings per American Depositary Share (EPADS) in the third quarter compared to 16 cents in the year-ago quarter. However rising silicon wafer costs and weaker selling prices led to Suntech posting lower profits in the quarter compared to the Zacks Consensus Estimate of 23 cents per EPADS.
Operational Results
Suntech registered total net revenues of $743.7 million, an increase of 19% from $625.1 million in the second quarter of 2010 and an increase of 57.2% from $473.1 million in the third quarter of 2009. Total photovoltaic (PV) products shipment increased 25.3% over the second quarter of 2010 and 107.1% year-over-year. Revenues in the reported quarter also comfortably beat the Zacks Consensus Estimate of $697 million.
In the reported quarter, Suntech's gross profit was $122 million and gross margin was 16.4% compared to gross profit of $113.9 million and gross margin of 18.2% in the second quarter of 2010. The sequential decline in gross margin was primarily due to a small decrease in the average selling price, and a marginal increase in the cost of silicon wafers used for production.
Operating expenses for the reported quarter decreased to $59.5 million compared to $132.9 million in the second quarter of 2010. As a result, Income from operations was $62.6 million compared to a loss from operations of $19.1 million in the second quarter of 2010.
The company boosted by the appreciation of the euro versus the US dollar gained $42 million in the reported quarter compared to a foreign exchange loss of $61.4 million in the second quarter of 2010. Overall, the company recorded a net income of $33.1 million compared to a net loss of $174.9 million in the second quarter of 2010 and net income of $30.2 million in the year-ago quarter.
Outlook
Wuxi, China-based Suntech is a leading solar energy company. The company designs, develops, manufactures and markets photovoltaic (PV) cells and modules. In the reported quarter, shipments and revenues were a company record. The company was also able to raise the annualized solar cell and module production capacity to 1.6 GW, and expects the annualized capacity to reach 1.8 GW by the end of fiscal 2010.
Looking forward in the fourth quarter of 2010, Suntech expects at least 10% sequential growth in shipments and targets to ship more than 1.5 GW of solar products in 2010, representing a year-over-year growth of at least 113%.
Suntech Power is one of the largest producers of PV solar modules under its proprietary Pluto technology with a geographically-diversified customer base. The company is in the process of acquiring a 375 MW of ingot and wafer slicing capacity in China. Suntech expects the acquisition to enable the company to reduce its cost and improve profitability.
Other positive factors for Suntech include ongoing expansion programs, higher conversion efficiency through its Pluto technology-enabled modules, subsidy program in China, and improving operating efficiencies. However apprehensions over rising competition, subsidy cuts in Europe, and financial stability of its customers overshadow the positives.
Our Neutral recommendation on the stock indicates that it would perform in line with the broader market. In the near term we believe its Zacks #1 Rank (Strong Buy) peers like JA Solar Holdings Co. Ltd (JASO) and ReneSola Ltd. (SOL) are more promising compared to the Zacks #3 Rank (Hold) Suntech Power.
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