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Will Yingli Green (YGE) Disappoint Again in Q2 Earnings?

Zacks Equity Research

Yingli Green Energy Holding Co. Ltd. YGE or Yingli Solar is slated to report second-quarter 2015 results before the opening bell on Sep 8, 2015. Last quarter, the company posted a negative earnings surprise of 68.42%. Let’s see how things are turning out for the second quarter.

Factors Affecting This Quarter

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, thereby resulting in cross-defaults, putting it at liquidation risk.

In its recently released preliminary second-quarter 2015 results, the company revealed that it expects quarterly module shipments in the range of 720–730 megawatt (“MW”), within the earlier guided band. Module shipments in the second quarter of 2014 were 887.9 MW. As for margins, Yingli Green did not offer an encouraging figure given the decline in the average selling price of PV modules. A variety of factors leading to a rise in manufacturing cost, including lower capacity utilization, also acted as a drag on margins.

Yingli Solar hinted that apart from a drop in the average selling price of PV modules, higher shipments to China also had an adverse impact on the company’s total net revenues for the to-be-announced quarter. Considering the changes that took place in the second quarter, Yingli Solar will provide a revised guidance for 2015 shipments when it announces its second quarter results.

The company recently received a notice from NYSE about its non-compliance with the stock exchange’s price criteria for continued listing standard.

Substantial indebtedness along with the company’s inability to report in the green for the past few quarters signals more trouble ahead for the company. Moreover, the pressure on margins is definitely a concern.

Yingli Solar, one of the world’s leading solar panel manufacturers, expects global PV demand to show healthy growth in 2015.

Earnings Whispers?

Our proven model does not conclusively show that Yingli Green Energy will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate as well as the Zacks Consensus Estimate stands at a loss of 21 cents.

Zacks Rank: Yingli Green Energy’s Zacks Rank #3, which when combined with a 0.00% ESP, makes an earnings beat inconclusive.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Q2 Peer Releases

Here are some stocks in the same sector which have surpassed earnings estimates in the second quarter of 2015.

ReneSola Ltd. SOL reported an adjusted loss of 2 cents per American Depositary Share (“ADS”) in the second quarter of 2015, narrower than the Zacks Consensus Estimate of a loss of 17 cents.

Trina Solar Ltd TSL reported earnings of 42 cents per ADS in the second quarter of 2015, beating the Zacks Consensus Estimate of 24 cents by 75%.

JinkoSolar Holding Co. JKS reported second-quarter non-GAAP adjusted earnings of $1.04 per ADS in the second quarter of 2015, beating the Zacks Consensus Estimate of 83 cents by 25.3%.

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