This week marks the end of the first quarter of 2017, but we're still getting a slow stream of earnings announcements from the end of 2016, which is a byproduct of many of the biggest solar companies in the world being foreign filers. Despite the late reports, earnings can still give us some insights into where the industry is headed.
Continue Reading Below
Outside of earnings, there were also some big announcements from First Solar (NASDAQ: FSLR), which continues to slowly but surely execute on its project monetization strategy. Here are the highlights that investors should know this week in solar.
Image source: First Solar.
Another bad earnings report
There's no way to sugarcoat it: Earnings from the fourth quarter of 2016 were bad in solar and 2017 won't be much better. This week, ReneSola said that revenue fell 21.7% from a year ago to $232.1 million, gross margin was just 2.1%, and net loss for the quarter was $25.5 million.
This loss came despite selling six utility-scale solar projects in the U.S., which were once high-margin items for solar companies. But the 2.1% gross margin is really the story here. Solar manufacturers have seen margins shrink, and with global demand for solar panels expected to fall in 2017, there's little likelihood that finances will increase short term. With $624 million in debt on the balance sheet, it's very possible that ReneSola and other manufacturers won't survive the year.
Continue Reading Below
First Solar's big project week
First Solar monetized the cash equity portion of the 250 MW Moapa Southern Paiute Solar Project this week, selling to Capital Dynamics. Terms of the deal weren't disclosed, but it's safe to say the sale will be worth over $250 million ($1 per watt) to First Solar.
The other announcement was a 48.5 MW deal to supply panels and tracking technology to the Manildra Solar Farm in New South Wales, Australia. The plant will begin construction in the first half of this year and will be completed in 2018. Incremental project signings keep a business like First Solar's afloat, so keeping the deal flow going is good news for investors.
News and notes
There were some very notable other items taking place in solar this week that shouldn't go overlooked.
- Suniva, a small U.S. solar manufacturer, appears to be in financial trouble and word of layoffs at the company hit the news this week. U.S. manufacturers have struggled with competition from Asia and don't have as low a cost structure as their commodity rivals. So, if a company like ReneSola has a gross margin of just 2%, Suniva is likely losing money on each panel unless it can charge a premium for domestically produced panels. And even a small premium may not be enough for a company like this to survive.
- Sunrun (NASDAQ: RUN) became the first national solar installer to expand into Wisconsin this week. The company will bring cash and loan sales to the state, potentially learning that leases aren't going to help sell solar in new states. Competitors will be watching this closely because the Midwest is largely untapped for solar, but it may be a big growth market in the future.
- Canadian Solar (NASDAQ: CSIQ) got $35 million in financing from Sumitomo Mitsui Finance this week to fund PV projects in Japan. The financing is an incremental positive and could keep the company's foothold in the attractive Japanese market.
Check back next week for more on what's happening in the solar industry.
10 stocks we like better than First Solar
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and First Solar wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of February 6, 2017