Yingli Green Energy (YGE) Powers Ahead to an Earnings Beat
Yingli Green Energy (NYSE: YGE) earlier today reported earnings per share of $0.21 for the second quarter, beating analyst estimates of $0.19 per share. Revenues came in at $398 million, above the consensus estimate of $371 million. In early trading, shares of Yingli are trading between unchanged and slightly negative.
Yingli, one of the biggest Chinese solar companies is the latest in the sector to report strong earnings. This second quarter saw the company’s logo flashing brightly and prominently on the sidelines of the World Cup Soccer action from South Africa. Liansheng Miao, Yingli’s Chairman and CEO offered the following observations on the quarter:
“The past few months have been very exciting for us in many ways. In the second quarter of 2010, we achieved a mid teen percent sequential increase in PV module shipment volume and realized a record high gross margin of 33.5%….
In addition to delivering solid operational results, the Company also reached important milestones on many other fronts. In terms of marketing, our 2010 FIFA World Cup sponsorship has made a huge splash. As the market for distributed electricity generation is expanding in many major solar markets, the power to influence and decide the solar industry’s future is rapidly vesting to the general public. We believe our groundbreaking 2010 FIFA World Cup sponsorship project, accompanied by a series of marketing initiatives, has effectively boosted our brand recognition both within and outside of the conventional solar community, which is expected to greatly enhance our competitive advantages in this new era. Furthermore, supported by our reliable products and services, we expect to enjoy a pricing premium and receive stronger demand as a result of our ever-increasing brand equity.”
During the quarter, Yingli received a $5 billion line of credit from the state-owned China Development Bank. The company will use this money in order to build out its manufacturing capacity, from the present 600 megawatts to 1 gigawatt by the end of the third quarter. For the next quarter, Yingli anticipates a better than expected gross margin on account of better pricing in the first half of the year and the cost efficiencies that result from their increased manufacturing capacity.
Yingli is the latest in the solar field to increase their production capacity on account of steady demand. This has helped further push down costs in the sector. Yesterday we saw the Suntech Power (NYSE: STP) raised guidance on account of lower production costs, and just a week ago SunPower (NASDAQ: SPWRA) did the same.
Recently the stock put in a significant higher low on the daily chart. Price seems poised to test the pivotal $12 level. Take a look at the chart and see how often that area has provided a congestion zone for support and resistance. With the 200-day moving average sitting just north of the $12 level, Yingli will need an actual catalyst to trigger more upside through the congestion zone.
Along with their capacity build out, Yingli is making a push to increase its presence in the US market. In the wake of the Gulf Oil Spill and the European subsidy cuts, the US is an incredibly important growth region for solar companies. Combined, the US and China represent the lion’s share of present and anticipated growth in the market, and Yingli recognizes the importance of positioning for this future growth.
That being said, US-based solar companies with superior technology like First Solar (NASDAQ: FSLR) and SunPower (NASDAQ: SPWRA) may offer better long-term investment opportunities as detailed in “Your Cheat Sheet to Investing in the Sun“.