ReneSola Tops, Raises Outlook - Analyst Blog

ReneSola Ltd. (SOL) reported third-quarter adjusted earnings per American depositary share (EPADS) of 70 cents per share, beating both the Zacks Consensus Estimate of 50 cents and year-ago quarterly loss of 14 cents.

Operational Results

ReneSola's revenues rose to $358.7 million, increasing 41.3% from $253.9 million in the second quarter of 2010 and  154.5% compared to $140.9 million in the year-ago quarter. Revenue in the reported quarter also comfortably beat the Zacks Consensus Estimate of $317 million. The upside in results came from higher wafer average selling prices and increasing module shipments.

ReneSola's product shipments were of 324.9 MW versus 258.3 MW (up 25.8%) in the second quarter of 2010 and 146.9 MW (up 122.1%) in the year-ago quarter. In the reported quarter, solar wafer and module shipments were 226.6 MW and 98.3 MW, respectively.

ReneSola clocked a gross profit of $116.7 million and a gross profit margin of 32.5%, compared to $76.6 million and 30.2% in the second quarter of 2010. In the year-ago quarter, the company clocked a gross profit of $4.7 million and a gross profit margin of 3.4%.

Overall, ReneSola recorded a net income of $60.1 million compared to a net income of $36.1 million in the second quarter of 2010 and a net loss of $10.2 million in the year-ago quarter.

Financial Condition

At the end of third quarter 2010, ReneSola had cash and cash equivalents of $211.6 million, compared with $95.2 million at the end of the year-ago quarter. Long-term borrowings increased to $188.6 million from $170.7 million at the end of the year-ago quarter. The company generated strong operating cash flows of $287.1 million in the first nine months of 2010 compared to $22.5 million used for operating activities in the year-ago period.

Guidance

Reflecting the robust market demand for solar products, ReneSola increased its fourth quarter 2010 guidance. The company expects total solar wafer and module shipments to be in the range of 310 MW–330 MW, revenues to be in the range of $340 million–$360 million and gross profit margin to be between 30%–32%.

Our Take

The fortunes of ReneSola look greener with a geographically diversified customer base, ongoing expansion programs, subsidy programs, improving operating efficiencies, rising margins and material cost savings through its vertically integrated production structure. We feel the Zacks #1 Rank (strong buy) stock would open up a small window of opportunity for investors in the near term (1 to 3 months).