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JA Solar (JASO) to Report Q3 Earnings: What's in Store?

JASO TSL CSIQ

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Solar company JA Solar Holdings Company Ltd. (JASO - Free Report) is set to release third-quarter results before the opening bell on Nov 17.

Last quarter, the company posted a negative 49.15% earnings surprise. However, JA Solar was able to beat the Zacks Consensus Estimate in two of the trailing four quarters, with an average positive surprise of 35.83%.

 Let’s see how things are shaping up prior to this announcement.

JA SOLAR HOLDGS Price and EPS Surprise

 

JA SOLAR HOLDGS Price and EPS Surprise | JA SOLAR HOLDGS Quote

Factors at Play

JA Solar caters to a geographically diverse customer base, spanning across Germany, Italy, the U.S., Spain, India, Korea, China and Japan. As the company entered the third quarter, a slowdown was observed in the Chinese market.

In fact, management provided a conservative outlook for the second half of 2016 for JA Solar’s business. This was primarily because of the anticipation of a temporary slowdown in demand within the domestic market. In particular, the company apprehends a 38% decline in China for the third quarter.

On the contrary, a substantial uptick is expected in the markets of Japan and India, which in turn is expected to boost JA Solar’s third-quarter business from Asia Pacific.  Also, the U.S. market is expected to deliver an improvement of 14%, while 7--8% growth is anticipated in the European market.

The company expects shipments of 1.2–1.3 gigawatts (“GW”) of cells and modules for the third quarter, all being external sales. Operating expenses are likely to decline slightly on a sequential basis. The company also estimates shipments of about 50 megawatts (“MW”) to its downstream projects for the second half of 2016.

However, apart from the anti-dumping policies in the U.S. and Europe, JA Solar has to face cut-throat competition from domestic peers. The fierce competition between Chinese solar companies often hurts the business margins of most firms. Moreover, high product costs continue to impact the stock and are expected to hamper third-quarter results as well.

The Zacks Consensus Estimate for the company’s revenues is pegged at $586 million for the third quarter. This reflects a decline of 2.5% on a year-over-year basis. Meanwhile, our estimate for the bottom line stands at 3 cents, reflecting a 95.6% drop.

Earnings Whispers

Our proven model does not conclusively show that JA Solar is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: JA Solar has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 3 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: JA Solar carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

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

Peer Release

SolarCity Corp. posted an adjusted loss of $2.27 per share in the third quarter of 2016, narrower than the Zacks Consensus Estimate of a loss of $2.35. The company’s total revenue of $200.6 million in the quarter, exceeded the Zacks Consensus Estimate of $168 million by 19.4%. This largest U.S. rooftop solar installer currently holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are a few stocks in the Solar space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:

Canadian Solar Inc. (CSIQ - Free Report) has an Earnings ESP of +144.83% and a Zacks Rank #3. The company is scheduled to release third-quarter results on Nov 21.

Trina Solar Limited (TSL - Free Report) has an Earnings ESP of +118.75% and a Zacks Rank #3. It is expected to report earnings on Nov 28.

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