STRI Posts Wider Loss, Beats Revs

Zacks

STR Holdings, Inc.’s (STRI) fourth-quarter 2012 adjusted loss per share of 8.50 cents was marginally wider than the Zacks Consensus Estimate and the year-ago loss of 8 cents.

Including amortization of intangibles, restructuring costs, and various other impairment charges, GAAP loss per share was $2.97, wider than the loss per share of $1.63 in the fourth quarter of 2011.

In full year 2012, adjusted loss per share was 13 cents versus earnings per share of 69 cents. The loss was wider than the Zacks Consensus Estimate of a loss of 11 cents per share. Including one-time charges, GAAP loss per share as reported by the company was $5.02 compared with a loss of 3 cents per share in full year 2011.

The results reflect continued pricing pressure, increased competition and the loss of First Solar, Inc. (FSLR) as a customer.

Operational Results

STR Holdings generated revenues of $16 million, higher than the Zacks Consensus Estimate of $15 million. However, revenues were lower than the year-ago figure of $36.5 million. In 2012, total revenue of $95.3 million was marginally higher than the Zacks Consensus Estimate of $95 million. However, the top line was down 59% year over year.

Gross loss for the fourth quarter of 2012 was $6.0 million, compared with a profit of $4.3 million in the fourth quarter of 2011. Selling, general and administrative expenses were $4.3 million, down 43.7% year over year. The decline in expenses notwithstanding, operating loss widened in the reported quarter to $184.3 million versus a loss of $68.3 million in the year-ago quarter in the wake of plummeting sales.

Financial Condition

STR Holdings at the end of the reported period had cash and cash equivalents of $82 million, compared with $58.8 million at the end of 2011. Net cash provided by (used in) operating activities during the quarter was $11.0 million versus ($73.5) million in the year-ago quarter.

Guidance

In first quarter of 2013, STR Holdings expects total revenue in the range of $9 million to $10 million and loss per share in the range of 10 cents to 8 cents per share.

In full year 2013, the company expects total revenue in the range of $45 million to $55 million and loss per share in the range of 25 cents to 15 cents per share.

At the Peer

Yesterday, another solar company ReneSola Ltd. (SOL) reported fourth quarter of 2012 adjusted loss per American Depositary Share (“ADS”) of 29 cents per share, beating the Zacks Consensus Estimate of a loss of 37 cents loss per ADS but much wider than the year-ago loss of 21 cents per ADS.

Our Take

STR Holdings failed to meet the Zacks Consensus Estimates owing to a challenging solar industry.

In order to cope with the difficult environment, the company is developing and commercializing innovative products. The company continues to execute its strategic objective of streamlining the cost structure. In the process of a comprehensive review of its cost structure, the company decided to make significant headcount reductions throughout the organization. Also, the company is evaluating its long-lived assets for impairment, and thereby expects to incur significant restructuring charges in 2013.

Though the loss of First Solar hit the company hard, STR Holdings is trying to compensate this loss in several ways. STR Holdings for that matter plans to stop its manufacturing operations at its East Windsor, Conn. facility.

Going forward, expenditure on research and development, severance charges incurred on closure of the facility and lower average selling prices remain a matter of concern for the company.  The company presently retains a Zacks Rank #4 (Sell).

In the near term, we would advise investors to accumulate its Zacks Rank #2 (Buy) peer Canadian Solar Inc. (CSIQ).

STR Holdings, Inc., together with its subsidiaries, designs, develops, manufactures, and sells encapsulants for the solar industry worldwide. Its encapsulants protect the embedded semiconductor circuits of solar panels. The company sells its products to crystalline silicon and thin-film solar module manufacturers.

 

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