U.S. Solar Industry Reorganizes In The Face Of Challenges

Reduced feed-in-tariffs from European markets, lower prices, and increased competition from Chinese manufacturers continued to hurt the solar power sector. Three U.S. solar players have already announced bankruptcy this year and the recent quarterly results of the country’s two major solar powers, SunPower and First Solar, don’t look promising.

First Solar’s Financials
First Solar’s (NASDAQ:FSLR) Q3 revenues fell 52% over the year to $1.01 billion with EPS falling 47% over the year to $2.25. The Street had projected revenues of $1.01 billion with EPS of $3.32.

For the year, First Solar reduced their revenue outlook to $3 billion-$3.3 billion from earlier projections of $3.6 billion-$3.7 billion. EPS for the year is expected to fall significantly from the earlier outlook of $9.00-$9.50 to a revised outlook of $6.50-$7.50. The Street was expecting revenues of $3.56 billion with EPS of $7.05.

First Solar’s Global Expansion
They are diversifying their global presence and recently doubled production capacity in Europe, with their Frankfurt plant now producing 17,000 thin-film modules a day with efficiency levels of 11.7% and becoming the biggest thin-film factory on the Continent. Meanwhile, they delayed their French and Vietnam facility production “until global supply and demand dynamics support the additional capacity.”

FirstSolar believes that the markets of India, the Middle East, North Africa and China are high-growth markets for the solar industry. In India, they recently announced a 100-megawatt module supply agreement with Reliance, one of India’s leading producers. To cater to these markets, they are building teams who are engaging with local customers and communities to develop innovative solutions catered to local demand. In addition, they are working with the policymakers and regulators in these markets to develop market frameworks to enable large-scale solar deployment.

The stock is trading at $49.59 with a market capitalization of $4.28 billion. It touched a 52-week high of  $175.45 in February of this year.

SunPower’s Financials
SunPower’s (NASDAQ:SPWRA) Q3 revenues increased 28% over the year to $705.4 million, missing the Street’s target of $713 million. EPS of $0.16 was ahead of the market’s expectations of $0.06 per share.

SunPower expects the current year’s revenues to be $2.4 billion-$2.45 billion with a net loss of $0.05 to earnings of $0.20 per share. The market was expecting revenues of $2.79 billion with EPS of $0.73.

SunPower’s Capacity Reorganization
SunPower is reorganizing production capacity based on global demand. To cater to the growing demand in the U.S. market, they recently began construction of the 250-megawatt California Valley Solar Ranch, which was sold to NRG. However, globally, they plan to reduce their manufacturing capacity by 20% during the current quarter to balance inventory levels. Further, they also delayed their plans to expand their JV facility in Malaysia from 2012 to 2013.

SunPower’s International Growth
They are also seeing good traction from the Indian market. Recently, they received their first power plant order from the country with a 15-MW agreement with Mahindra EPC Services for delivery due by the end of 2011. They are also expanding in Japan, where the Toshiba partnership has helped them to double the number of orders received in the year.

The stock is trading at $8.76 with a market capitalization of $855.46 million. It touched a 52-week high of $23.36 earlier this summer.