ReneSola Ltd SOL recently released its preliminary unaudited financial results for fourth-quarter and full-year 2019. Notably the company slashed its revenue guidance for both the quarter and the full year.
The solar project developer is expected to report its fourth-quarter and full-year results in March 2020.
Investors Lose Confidence
ReneSola’s recently announced preliminary results dampened investors’ confidence. As a result, share price of this company fell 1.5% to close at $1.36.
In fact, shares of ReneSola have been deteriorating for quite some time. Notably, its share price has lost 12.3% against the industry's 60.7% growth over the past year.
Slashed Revenue Guidance
According to the preliminary results, the company’s revenues for the fourth quarter are projected within the range of $20-$25 million, lower than its previous guidance range of $45-$50 million. The mid-point of the current guidance ($22.5 million) indicates a surge of 301.8% from the year-ago quarter’s level of $5.6 million. However, the updated guidance lies below the Zacks Consensus Estimate for revenues of $44.8 million.
For the full year, the company’s revenues are projected within the range of $115-$120 million, lower than its previous guidance range of $130-$140 million. The mid-point of the current full-year guidance ($117.5 million) indicates a rise of 21.3% from the year-ago level of $96.9 million. However, the updated guidance lies below the Zacks Consensus Estimate for revenues of $137.3 million.
Upbeat Margin Guidance
Gross margin for fourth-quarter 2019 is projected in the range of 27-31% compared with the prior guidance of 10-15%. The mid-point of the current guidance (29%) suggests a contraction of 4360 basis points from the year-ago quarter’s level of 51.4%.
Gross margin for 2019 is projected in the range of 25-30% compared with the prior guidance of 20-25%.
Rationale Behind Slashed View
ReneSola has identified the delay in recognizing revenues from the sale of a solar project in Canada as the reason that led it to slash its revenue projections for the fourth quarter as well as full year.
However, the company expects to complete this project sale and recognize revenues from the same in the first quarter of 2020.
What Lies Ahead?
ReneSola’s upcoming quarterly results are expected be affected due to the aforementioned project-sale delay. However, the company continues to benefit from a steady flow of contracts from both domestic and international customers. With the successful execution of its downstream strategy, the company is currently expanding its business in the international markets of Canada, Poland, Hungary, France and Spain.
As of Sep 30, 2019, the company had 7 MW and 7.7 MW of completed projects in Canada and Hungary, respectively, which are currently up for sale. Its total late-stage projects stand at 399.2 MW, of which 42.5 MW, 26 MW, 33.6 MW, and 12 MW are located in France, Poland, Hungary and Spain, respectively.
Such a solid project pipeline is expected to boost ReneSola’s growth over the long run.
ReneSola currently has a Zacks Rank #4 (Sell).
A few better-ranked stocks in the same sector are Enphase Energy, Inc. ENPH, JinkoSolar Holdings JKS and TC Energy Corp. TRP, all of which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enphase Energy surpassed the Zacks Consensus Estimate for earnings in the past four quarters, with positive surprise of 21.28%, on average. Its consensus estimate for 2020 earnings indicates year-over-year growth of 13.7%.
JinkoSolar’s long-term earnings growth is estimated to be 20%. Its consensus estimate for 2020 earnings indicates year-over-year growth of 105.2%.
TC Energy’s long-term earnings growth is estimated to be 7%. It surpassed the Zacks Consensus Estimate for earnings in the past four quarters, with positive surprise of 5.16%, on average.
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