Will Hanwha Earnings Look Less Dark?
Hanwha SolarOne will release its latest quarterly report on Monday, and investors have gotten a lot more excited about the stock's prospects in recent months. Yet even though the Chinese solar market has seen some encouraging signs lately, Hanwha earnings are likely to remain in the red for a long while to come.
For years, intense competition in the Chinese solar industry has led to overproduction and weak pricing, which in turn has made it nearly impossible for most Chinese solar companies to be profitable. Recently, though, signs of financial difficulties among weaker Chinese solar players have made investors optimistic that a shaking-out in the industry could leave survivors with better profit potential. Let's take an early look at what's been happening with Hanwha SolarOne over the past quarter and what we're likely to see in its quarterly report.
Stats on Hanwha SolarOne
Analyst EPS Estimate
Last Quarter's Revenue
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: S&P Capital IQ.
Can Hanwha earnings keep improving this quarter?
In recent months, analysts have seen more promise in their views on Hanwha earnings. They've narrowed their June-quarter loss estimates by a nickel per share and their full-year projections by $0.37 per share. That optimism has resulted in a massive 140% increase in the stock since early June.
Hanwha's big move higher began in late June, when the company announced that it successfully got a $100 million term loan from Korea's Export-Import Bank. The default earlier this year from Suntech Power refocused investor attention on making sure that money-losing Chinese solar companies could get outside financing to sustain their operations, and the fact that a non-Chinese lender was willing to extend Hanwha credit is a vote of confidence for the company.
Yet the real pop among Chinese solar stocks came from a combination of two much broader industry-moving announcements. In mid-July, the Chinese State Council said it plans to build 35 gigawatts of solar capacity within the next two years. Even though that news strongly suggests continued reliance from China's solar industry on its own government, it nevertheless sent Hanwha and its peers higher. Then, later in the month, Europe and China agreed to settle a potential trade dispute by having Europe impose price floors on sales of Chinese solar panels. By avoiding a much more punitive tariff, Chinese solar companies should be better able to weather the potential impact that minimum sales prices could have on the industry.
In its March quarter, Hanwha managed to eke out a positive gross margin. Continuing to do so will be critical going forward, as rivals Yingli Green Energy and JA Solar have both reversed their own negative gross margins. Even with those gains, though, both companies continue to struggle operationally, with Yingli having to manage $2.8 billion in debt and with JA Solar failing to boost its sales-volume guidance, disappointing investors.
In the Hanwha earnings report, watch closely to see where the company's sales are coming from and how much it's able to boost its margins. Without considerable progress, the gains the stock has seen in recent months could fade into the shadows quickly if Hanwha can't sustain its forward momentum.
Solar is sweeping the nation, but record oil and natural gas production has kept the attention of U.S. investors squarely on the fossil-fuel industry. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.
Click here to add Hanwha SolarOne to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
The article Will Hanwha Earnings Look Less Dark? originally appeared on Fool.com.Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.