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ReneSola Ups Q1 Guidance, Expects Module Price Drop to Help

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ReneSola Ltd. (SOL - Free Report) recently raised its revenue guidance for the first quarter of 2018. ReneSola currently expects revenues in the range of $40-$45 million compared with the previously anticipated range of $30-$35 million. It also expects solar module prices to drop significantly in the second half of the year, which will boost returns from its overseas as well as domestic projects.

Reasons Behind the Guidance Raise

There were multiple reasons that led the company to raise its first quarter guidance. This could be attributed to ReneSola’s existing solar-powered projects that continue to receive the entitled subsidies from government. Its future projects are also anticipated to draw benefits in the second half of 2018, led by a significant decline in prices for equipment and construction. Going forward, the company is quite confident of its growth, which witnessed business momentum since its manufacturing business divestiture.

ReneSola entered into an equity investment agreement valued at $31.4 million in May, with a strategic partner. This led to significant capital infusion in the company, further enabling ReneSola to execute its downstream project development plan in China.

ReneSola’s DG-based projects are mainly deployed in the eastern provinces of China, which is usually characterized by high electricity prices. The company thus expects to benefit significantly from lower equipment cost and stable electrical rates along with declines in module prices.

Long-Term Plans

During the beginning of the first quarter of 2018, ReneSola had a robust solar power project pipeline of around 1.1 gigawatts (GW). Going forward, the company strongly emphasizes its downstream strategy execution and seeks opportunities in small-scale solar projects in diversified regions.

Further, ReneSola’s growth is very strongly driven by its China DG projects. Although utility-scale solar continues to dominate the Chinese solar market, distributed solar is also witnessing rapid growth. As per a report by the National Development and Reform Submission, China connected 7.7GW of DG projects in the first quarter, which grew 217% on year-over-year basis. Such favorable growth patterns will most likely aid ReneSola to achieve its long-term goals.

Price Movement

ReneSola’s stock has lost 4.9% in a year compared with the industry’s gain of 31.3%. The underperformance may have been caused by the stiff competition in the solar market.

Zacks Rank & Key Picks    

ReneSola currently carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the same space are Canadian Solar Inc. (CSIQ - Free Report) , Hanwha Q CELLS Co., Ltd. and SolarEdge Technologies, Inc. (SEDG - Free Report) .

While Canadian Solar and Hanwha Q CELLS sport a Zacks Rank #1 (Strong Buy), SolarEdge Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian Solar recorded an average positive earnings surprise of 29.35% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 47.1% to $2.06 in the last 90 days.

Hanwha Q CELLS recorded an average positive earnings surprise of 132.86% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 72.7% to 38 cents in the last 90 days.

SolarEdge Technologies Holdings recorded an average positive earnings surprise of 29.11% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 8.17% to $3.31 in the last 90 days.

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