Trina Solar (TSL) Q2 Earnings & Revenues Beat, View Intact

Solar photovoltaic (“PV”) module manufacturer Trina Solar Ltd. (NYSE:TSL) reported earnings of 42 cents per American Depositary Shares (ADS) in the second quarter of 2016, beating the Zacks Consensus Estimate of 34 cents by 23.5%. Earnings were flat with the year-ago level.

Total Revenue

Trina Solar posted revenues of $961.6 million in the second quarter, up 33% year over year and 17.7% sequentially. The year-over-year increase was primarily driven by higher shipment volumes, while the sequential jump was mainly attributable to growth in China on account of rush orders before Jun 30 in expectation of a likely subsidy policy adjustment. These positives offset the decline in shipments to the U.S., Europe, Japan and the rest of Asia. The quarterly figure also surpassed the Zacks Consensus Estimate of $895 million by 7.4%.

Shipments

Solar module shipments in the reported quarter totaled 1,658.3 megawatts (“MW”), compared with 1,370.4 MW in the year-ago quarter and 1,423.3 MW in the previous quarter. The increase was attributable to rising demand in China.

Operational Update

Gross profit in the second quarter was $176.3 million. The reported figure was higher than $144.9 million a year ago and $139.7 million in the previous quarter.

Gross margin was 18.3% compared with 20% in the second quarter of 2015 and 17.1% in the first quarter of 2016. The sequential increase in gross margin was mainly due to lower blended costs on account of a significant decrease in antidumping and countervailing duties in the U.S. as the company increased the proportion of shipments from its Thailand facilities in the quarter. The year-over-year decline, on the other hand, was primarily due to a higher decline in the average selling price in most markets, compared with the decline in the company's cost per watt.

Total operating expenses were $92.6 million in the quarter, up 10% year over year but down 2.4% sequentially.

Interest expense was $25.5 million, higher than $12.4 million in the year-ago period and $15.1 million in the preceding quarter.

TRINA SOLAR LTD Price, Consensus and EPS Surprise

Financial Update

As of Jun 30, 2016, cash and cash equivalents were $648.1 million, compared with $465.4 million as of Dec 31, 2015.

Long-term debt, excluding the current portion as of Jun 30, 2016, was $635.0 million. The company had long-term debt of $521.3 million as of Dec 31, 2015.

Guidance

Trina Solar expects third-quarter 2016 module shipment in the range of 1.55 gigawatts (GW) to 1.65 GW.

For the full year, the company has reaffirmed its guidance for total PV module shipments in the range of 6.30 GW to 6.55 GW. The company also reiterated its plans to connect 400 MW to 500 MW downstream PV power projects to the grid across the world, including 15% to 20% of distributed generation projects in China.

Peer Releases

JA Solar Holdings Co. Ltd. (NASDAQ:JASO) posted second-quarter 2016 adjusted earnings of 30 cents per diluted American Depositary Share (ADS), missing the Zacks Consensus Estimate of 59 cents by a wide 49.2%. Earnings, however, improved from the year-ago figure of 27 cents by 11.1%.

Yingli Green Energy Holding Company Ltd. (NYSE:YGE) , also known as Yingli Solar, reported operating income of 90 cents per American Depositary Share (“ADS”) in second-quarter 2016. The Zacks Consensus Estimate was a loss of 30 cents. Moreover, in the year-ago quarter, the company had reported a loss of $5.30 per ADS.

An Upcoming Peer Release

ReneSola Ltd. (NYSE:SOL) is scheduled to report second-quarter results on Aug 24.

Zacks Rank

Trina Solar presently has a Zacks Rank #3 (Hold).