ReneSola (SOL) Q3 Loss Wider Than Expected, Sales Down

ReneSola Ltd. (NYSE:SOL) reported a loss of 20 cents per American Depositary Share (“ADS”) in the third quarter of 2016, wider than the Zacks Consensus Estimate of a loss of 16 cents. However, the company had reported earnings of 8 cents in the year-ago quarter.

Revenues

Moreover, ReneSola’s third-quarter net revenue of $187 million missed the Zacks Consensus Estimate of $201 million by 7%. Reported revenues also deteriorated 49.2% year over year and 25.2% sequentially.

Management attributes the sales decline to lower module shipments to external customers due to weak market demand, and reduced combined average selling prices (ASP) as it strategically directed shipments toward downstream projects.

Shipments

In the quarter under review, external module shipments were 191.2 megawatts (MW), down 52.9% year over year and 32.3% sequentially. Wafer shipments totaled 290.5 MW, down 15% year over year and 39.4% sequentially.

Operational Highlights

Gross margin of 10.1% in the quarter shrank 600 basis points (bps) year over year and 640 bps sequentially. The sequential contraction was mainly due to lower wafer and module ASPs, and higher polysilicon prices.

Operating expenses amounted to $30.7 million, down 35.9% from the prior-year quarter and 11.6% from the preceding quarter.

Operating loss during the quarter was $11.9 million. The company had reported operating income of $11.4 million in third-quarter 2015 and $6.4 million in second-quarter 2016.

Financial Condition

As of Sep 30, 2016, ReneSola had cash and cash equivalents plus restricted cash of $139.4 million, compared with $178.4 million as of Dec 31, 2015.

Net cash used in operating activities in the first nine months of 2016 was $17.0 million, compared with cash inflow of $39.9 million in the year-ago period.

Total debt was $699.0 million as of Jun 30, 2016, down from $716.5 million as of Jun 30, 2016.

Guidance

The company expects fourth-quarter 2016 revenues of $220−$240 million with gross margin in the high single digits. The guidance primarily reflects the impact of an increase in polysilicon prices, along with lower wafer prices as well as lower shipments due to weak domestic demand.

Price Movement

During the third quarter, ReneSola’s current rate of return was -17.89%, while that of its peer group was pegged at -0.16%. This could be because of a decline in the company’s shipments in the quarter. In contrast, peers like JinkoSolar Holding Co., Ltd. (NYSE:JKS) and JA Solar Holdings Co. Ltd. (NASDAQ:JASO) recorded higher shipments during the same time frame.

A Peer Release

Trina Solar Ltd. (NYSE:TSL) reported earnings of 18 cents per American Depositary Shares (ADS) in the third quarter of 2016, beating the Zacks Consensus Estimate of 16 cents by 12.5%. Quarterly earnings, however, tanked 14.3% from the year-ago number of 21 cents.

Zacks Rank

ReneSola presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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