The solar industry was one of the biggest winners in 2013 as this lean sector soared on strong earnings and an investor belief that the space has finally grown up into a profitable segment. However, to start this year, gains have been a bit harder to come by, as many companies in the space have seen weakness in their share prices.
Yet this weakness to start 2014 may actually be a great buying opportunity for investors, as the strong solar growth story is still intact for the most part. Panel installation and demand are both surging, and with Europe (one of the key solar power markets) back on track, the future appears very bright for this industry.
While there are a number of companies that can take advantage of this trend, a look to vertically-integrated firms that have a global focus could be a great way to play the second leg up in solar power. One that stands out is definitely JinkoSolar Holding (JKS - Snapshot Report), a China-based company that specializes in low-cost production and supply of solar panels.
JKS in Focus
JinkoSolar has really made a name for itself since starting off as a wafer supplier in June 2006, as currently the company has annual integrated production capacity of over 1.2GW for silicon wafers, solar cells and modules. The firm has customers around the world, including its home market of China, but also European customers (such as Germany, Italy, and Spain), and the United States as well.
JinkoSolar has seen a meteoric rise in its earnings trajectory and it has actually been one of the more amazing stories in the solar space. JKS lost over $5/share in the December 2012 quarter, and it lost 56 cents a share in the March 2013 quarter, before it saw an amazing turnaround in the June 2013 quarter with a 56 cent per share profit, compared to a projection of a seven cent per share loss.
This incredible surge in earnings helped to power JKS to a gain of nearly 350% in 2013, and while that is obviously a huge gain, there is plenty of reason to believe that more solid trading is coming down the pike, especially if you look at recent earnings estimate revision activity.
JKS Earnings Estimates
After its horrendous December 2012 quarter in which the company missed estimates by 330%, the firm has been on an incredible tear in terms of beating earnings. Its ‘worst’ beat in the next three reports was a 66% one, while the past two reports both exceeded estimates by at least 288%.
Estimates have also been skyrocketing in recent sessions, moving current quarter estimates up from 46 cents a share 90 days ago, to 86 cents a share today. And current year estimates have also seen a remarkable increase, moving from 23 cents a share 90 days ago to $1.09/share today.
With these new consensus estimates, triple digit growth rates are now projected for JKS well into the future, suggesting its growth story isn’t slowing down by any means. So the recent drop in the JinkoSolar stock price of nearly 10% in the past month suggests that now is a great buying opportunity for JKS. This is particularly true when you consider that JKS currently has a Zacks Rank #1 (Strong Buy) meaning that its earnings estimate revision activity as of late has put it into very rare company.
Clearly JKS is an amazing growth story, and with analyst estimates skyrocketing as of late, there is plenty of hope that this will continue into the future too. This is especially the case when you consider the Zacks Industry Rank of the solar industry.
The space actually has the 5th best rank out of any industry that we cover, so the broad outlook for the segment is pretty favorable right now. So JKS could really be the best-of-the-best and definitely worth a closer look by investors who are searching for a top pick in this quickly growing industry.
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