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Solar ETFs Shine on Trina Solar Earnings Beat

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China’s second-largest solar panel manufacturer – Trina Solar – was a star performer on the New York Stock Exchange in Wednesday trading session as the stock jumped as high as 31% at the close. This represents the biggest one-day increase in more than five years.

The huge gain for this solar firm came after it reported astounding results for the first quarter of 2014. Trina solar posted profits for the third consecutive quarter with earnings of 37 cents per ADS. This is well above the Zacks Consensus Estimate of loss per share of $0.01 and year-ago loss of 90 cents (read: Will Solar ETFs be Powered by Earnings Beat?).

Revenues climbed 71% year over year to $444.8 million, beating the Zacks Consensus Estimate of $445 million. The incredible performance was credited to a rebound in the solar industry after a two-year slump, higher solar panel prices and growing demand in Japan, China and the U.S. In fact, sales nearly doubled in the U.S. growing to 31.9% from 16.3% from the prior quarter while Japan sales growth more than doubled to 30.4% from 12.6%.

The company shipped 558 MW of photovoltaic panels in the first quarter and expects to ship 950–1010 MW and 3.6–3.8 GW in the second quarter and full-year 2014, respectively. Moreover, Trina Solar is emerging as a strong leader in the global space thanks to its large footprint, strong balance sheet and improving earnings and revenues.

Market Impact

No doubt, Trina’s solid beat was well received by investors and has spread optimism in the broad solar industry, which has been the major victim of the sell-off in the growth and momentum stocks that started in late March (read: The Momentum Stock Crash Puts These ETFs in Focus).

As a result, the strong run up in the price of TSL sent other solar stocks higher on the day. These include ReneSola (SOL) which was up 11.74%, Yingli Green Energy (YGE) (up 10.18%), Canadian Solar (CSIQ) (up 7.10%) and JA Solar (JASO) (up 5.18%). If this wasn’t enough, the solid trading was also been felt in the ETF world. The Guggenheim Solar ETF ((TAN - Free Report) ) gained 5.2% while Market Vectors Solar Energy ETF () added 4% on the day.

TAN in Focus

This ETF follows the MAC Global Solar Energy Index, holding 30 stocks in the basket. Of these firms, TSL takes the ninth spot with 4.30% allocation. American firms dominate the fund’s portfolio with nearly 42%, followed by China (25.26%) and Hong Kong (16.13%).

The product has amassed $414.6 million in its asset base and trades in heavy volumes of more than 8.5 million shares a day. It charges investors 70 bps in fees per year. The ETF has a Zacks ETF Rank of 3 or ‘Hold’ rating with High risk outlook.

KWT in Focus

This fund manages a $26.1 million in asset base and provides global exposure to a small basket of 34 solar stocks by tracking the Market Vectors Global Solar Energy Index. Trina Solar occupies the thirteenth position in the basket accounting for 3.20% of the assets (see: all the Alternative Energy ETFs here).

In terms of country exposure, U.S. takes more than one-third of the portfolio, closely followed by China (34.0%) and Taiwan (15.7%). The product has an expense ratio of 0.66% and sees paltry volume of under 9000 shares a day.

Bottom Line

The upward trend in the stock is likely continue in the near term as Trina carries a Zacks Rank of # 1 (Strong Buy) and falls in the solar industry, which has a solid Zacks Industry Rank in the top 13%. This suggests bullishness in the company’s growth story and smooth trading in the days ahead (read: Can Solar ETFs Continue Their Rally in 2014?).

Given Trina Solar’s strength to lift the broad solar industry and the solid run up in its share price, the above-mentioned ETFs could be worth a look for investors seeking to ride out the upcoming surge in the stock and the industry as a whole.

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