Yingli Green Energy Holding Co. Ltd. YGE or Yingli Solar, is anticipating a deterioration in earnings and shipments in the third quarter, as revealed in its preliminary financial results. Note that the company is scheduled to report third-quarter results on Dec 8, before the opening bell.
The company’s current rate of return is -17.05%, while that of the industry is pegged at -14.62%. This could be because of an expected decline in shipments in the to-be-reported quarter and a sequential gross margin contraction due to the economic scenario discussed below:
The Preliminary View
In its preliminary results, Yingli Solar revealed that photovoltaic (“PV”) module shipments in the third quarter are estimated to be between 360 megawatts (“MW”) and 370 MW, within the previously guided range of 300 MW–400 MW. However, this represents a decline of 44.9% (at the mid-point) from module shipment of 662 MW in the preceding quarter.
The majority of shipments in the second quarter had been to China driven by a rush to finish PV projects ahead of feed-in tariff (“FiT”) changes at the end of the quarter. The consequent decline in downstream demand has been reflected in Yingli Green’s third-quarter guidance.
Meanwhile, Yingli Solar expects overall gross margin for the third quarter in the range of 5–6% (6–7% for module sales), reflecting a plunge from 18.2% in the prior quarter. The figure is also below the 12.5–14% range guided during the second-quarter earnings call. The margin contraction would mainly be due to an expected inventory provision and an increase in the unit manufacturing cost because of a lower utilization rate of production capacity.
However, this outlook is based on the company's preliminary review of operations for the third quarter. Depending on management's ongoing review, these expectations may change.
About Yingli Green Energy
Yingli Green Energy is a leading vertically integrated manufacturer of photovoltaic products based in China. The company manufactures the entire PV value chain, including ingot casting and wafering, solar cell production and solar panel assembly.
The company faces stiff competition from the likes of ReneSola Limited SOL, JA Solar Holdings Co., Ltd. JASO and Canadian Solar Inc. CSIQ.
Currently, Yingli Green Energy has 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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