Trina Solar (TSL) reported Q2 earnings before the bell today. The solar module manufacturer posted revenue upside ($204.2 million vs. 197.60 million consensus), but missed badly on EPS ($0.76 vs. $0.81 consensus).
The EPS downside resulted from a forex loss of $6.1 million ($0.24 a share), and a one-time loss of $2 million ($0.08 a share) due to the shutting down of its Lianyungang polysilicon project. These are non-operating items, but gross margin pressure looks to be a factor for the rest of the year, as Trina doesn’t expects its gross margins to increase until 2009, when polysilicon costs should lower due to increased supply.
Despite boosting its full year revenue outlook to a range of $850 million to $900 million (from a range of $770 million to $808 million), traders are sending the stock down almost 5% in mid-day trading. S&P threw in the towel:
Adjusted Q2 earnings per ADS of $0.76 vs. $0.83 is $0.07 below our estimate, reflecting a higher forex loss than we expected. Sales rose 69% from Q1 on strong demand, capacity expansion, and higher average selling prices. Gross and operating margins narrowed on higher polysilicon costs. We lower our ’08 earnings per ADS [American Depositary share] projection by $0.11 to $3.61 to reflect forex losses. Although we see geographic expansion and stable near-term margins aiding growth, we cut our 12-month target price by $7 to $40, reflecting a reduced P/E multiple based on our view of various risks.
S&P downgrades Trina Solar (TSL) from Buy to HOLD, target cut from $47 to $40.
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