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What to Expect from Yingli Solar (YGE) in Q4 Earnings?

Zacks Equity Research

Yingli Green Energy Holding Co. Ltd. YGE or Yingli Solar is slated to report fourth-quarter 2015 results on May 11, 2016. In the preceding quarter, the company posted a negative earnings surprise of 37.04%. In fact, Yingli Solar delivered negative earnings surprises in all the last four quarters with an average miss of 126.96%.

Let’s see how things are turning out for the fourth-quarter announcement.

Yingli Solar, one of the world’s leading solar panel manufacturers, has been struggling to survive amid a pile of debt. Importantly, the company has failed to generate profits since 2011. In this scenario, the company may find it difficult, if not impossible, to pay down its outstanding debt. This can lead to cross-defaults, putting it at liquidation risk.

On Apr 29, Yingli Solar signaled that its widening losses can lead to bankruptcy.  The company said its losses for 2015 will likely widen due to a series of write-offs, a drop in the cost of solar panels and lower shipments owing to a shortage of working capital.

This Zacks Rank #3 (Hold) stock expects net loss for 2015 to likely widen to 5.9 billion yuan from 1.3 billion yuan in 2014. Revenue are expected in the range of 10 billion yuan to 10.2 billion yuan, down from 12.9 billion yuan in 2014. This is mainly due to lower PV module shipments, which dropped 24% to 3.1 gigawatts given the lower utilization rate at factories and “tight cash flow.”

Among other negatives, Yingli Solar expects to recognize higher income tax expense of approximately 731.2 million yuan in 2015, compared with 89.7 million yuan in 2014. The increase was mainly due to the assessment on recovery of deferred income tax assets which resulted in an additional valuation allowance of deferred income tax assets in 2015.

The company also stated that it is in discussion with its creditors regarding payments due on two sets of securities underwritten by Bank of Communications Co.

Though things are not looking good for Yingli Solar, we have another Chinese solar stock, Trina Solar Limited TSL, which you may want to consider on the basis of our model which shows that it has the right combination of elements to post an earnings beat this quarter. Trina Solar has an Earnings ESP of +43.48% and a Zacks Rank #3. The company is expected to release first-quarter 2016 results on May 19.

Peer Releases

SunPower Corp. SPWR reported first-quarter 2016 adjusted loss of 42 cents per share, wider than the Zacks Consensus Estimate of loss of 23 cents by 82.6%. In the year-ago quarter, the company had reported earnings of 5 cents.

First Solar Inc. FSLR reported first-quarter 2016 earnings of $1.66 a share, sweeping past the Zacks Consensus Estimate of 91 cents by 82.4%. The reported number was also a reversal of the prior-year loss of 61 cents, reflecting higher sales, gross profits, operating income and lower expenses.

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YINGLI GREEN EN (YGE): Free Stock Analysis Report
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