Solar earnings have started to creep out and, to my surprise, a rising tide hasn't lifted all boats. SunPower reported stronger-than-expected earnings last week, and Suntech Power (NYS: STP) followed by raising shipment guidance about 10%. But some manufacturers are struggling in the current environment.
Canadian Solar (NAS: CSIQ) is looking good
Trying to find real differentiation among Chinese solar companies can often be hard. Most of them make similar equipment, generate modules with similar efficiency, and have similar cost structures. But Canadian Solar may be emerging from the pack as a leader.
The company increased fourth-quarter guidance today to 430 MW to 440 MW from a previous guidance of 340 MW to 360 MW. That's a huge jump when compared to Suntech and Yingli Green Energy (NYS: YGE) , which I'll get to in a minute. These two companies are typically thought of as tier-one suppliers, but Canadian Solar may have to be mentioned in that mix.
The other impressive revelation by Canadian Solar is that fourth-quarter cost per watt was $0.76, down from $1.31 in the second quarter of 2011. This hasn't helped margins, which are expected to be between 5% and 8%, but it shows just how low costs have gone.
I've even added an outperform rating for Canadian Solar on My CAPS page.
The mighty have fallen
Yingli Green Energy is supposed to be one of the solar leaders, but it seems to have been knocked from its perch recently. Preliminary results announced yesterday indicate that module shipments will fall 30% from the third to fourth quarter, from a previous estimate of a mid- to low-20% drop. Gross margin is expected to be about 3%, down from a 10% guidance.
So far, we can see that sales were slightly stronger than expected, but a lot of the installations in Germany were probably from inventories built up in the supply chain. And none of the demand has led to higher margins in the residential and commercial markets. If Yingli can't improve sales in the current conditions, I don't have much faith in LDK Solar (NYS: LDK) or JA Solar (NAS: JASO) , which are even further down the food chain.
Reading between the lines
There will definitely be winners and losers, even in China's solar shakeout, and we may be seeing a changing of the guard. Canadian Solar has a clear path to better efficiency and some of the lowest costs in the industry. We'll know more as earnings continue to pour out.
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At the time thisarticle was published Fool contributorTravis Hoiumowns shares of SunPower in his personal account and an account he manages. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdings, or follow his CAPS picks atTMFFlushDraw.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.