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Renesola (SOL) Rides on Organic Growth, Tariffs to Hurt

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We recently issued an updated research report on Renesola Ltd. (SOL - Free Report) . The company delivered second-quarter 2018 adjusted loss of 2 cents per American Depositary Share (ADS), missing the Zacks Consensus Estimate for earnings of 3 cents by 166.7%. However, the bottom line improved 98.7% from the year-ago period’s loss of $1.57 per ADS figure.

What’s Driving the Stock?

ReneSola continues to benefit from a steady flow of contracts from both domestic and international customers. Currently, the company is expanding business in the international markets of Canada, Poland, Hungary, France, Spain and Turkey. Further, it is actively pursuing opportunities in new markets, including South Korea and India.

Notably, the United States continues to be a large and robust market for ReneSola. The company has 285.5 megawatt (MW) shovel-ready stage projects in the United States, of which 24 MW are under construction and are likely to be connected to the grid in the third quarter of 2018. ReneSola boasts a global pipeline of approximately 1.51 gigawatt (GW) of projects in various stages.

On the domestic front, ReneSola owned over 226.5 MW of rooftop projects in operation in China. Moreover, the company currently has over 134 MW of rooftop projects under construction and anticipates owning approximately 350-400 MW of rooftop projects in China by the end of 2018. ReneSola’s China distributed generation (DG) projects is expected to drive the performance on account of rapid expansion.

Further, the company closed an equity investment agreement of approximately $30.2 million in May 2018 to acquire 40.13% of ReneSola's China DG Holdco. Notably, the Zacks Consensus Estimate for the company’s 2018 bottom line moved 61.5% north to 21 cents per share, year over year growth.

However, a significant portion of the company’s revenues is denominated in foreign currencies and hence the company faces foreign currency exchange risk. As ReneSola expands its distribution network internationally, its exposure to currency exchange rate fluctuations rises. With the U.S. administration imposing a tariff of 30% on the import of solar panels and modules, ReneSola’s revenue growth prospects from the nation seems bleak.

Renesola Ltd. Price

 

Zacks Rank & Stocks to Consider

Renesola currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same sector include Denbury Resources Inc. (DNR - Free Report) , Northern Oil and Gas, Inc. (NOG - Free Report) and Viper Energy Partners LP (VNOM - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Denbury Resources delivered an average positive earnings surprise of 162.86% in the last four quarters. The Zacks Consensus Estimate for current-year earnings has been revised 20% upward to 48 cents per share over the past 60 days.

Northern Oil and Gas delivered an average positive earnings surprise of 138.54% in the last four quarters. The Zacks Consensus Estimate for current-year earnings has been revised 34.2% upward to 55 cents per share over the past 60 days.

Viper Energy Partners delivered an average positive earnings surprise of 6.71% in the last four quarters. The Zacks Consensus Estimate for current-year earnings has been revised 72.8% upward to $2.54 per unit over the past 60 days.

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