Stocks and Sectors

Michael Lofing submits:

ReneSola reported record revenues, earnings and solar product shipments during the second quarter 2010. During the global financial crisis at the end of 2008 and beginning of 2009, the company recorded inventory write-downs, impairments of investments and overall poor earnings. The first quarter of 2010 showed promise with improvements across the board, including positive operating cash flow and positive gross and net income margins; however, the company must show this is a trend and not just an anomaly.

Strong financial performance in the first six months of 2010 has improved many of the company’s rankings. Strong operating cash flows and less capital expenditures have the company ranked 5th on operating cash flow-to-net income and 2nd on free cash flow-to-net income. Significant improvements in two components of the cash conversion cycle has the company ranked 5th. Considerable debt relative to both equity and cash put the company at 31st in terms of debt-to-equity and 25th in terms of cash-to-debt. The company ranks 6th in research and development expenses as a percentage of revenues because the company has been investing significant amounts to improve its business.

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Drilling and construction service provider Layne Christensen Company (Nasdaq:LAYN) has posted profits of $6.45 million, or $0.33 per diluted share for the second quarter of fiscal 2011, compared to a loss of $8.64 million or $0.45 per diluted share for the same period last year, on account of the strong performance in its mineral exploration business.

Excluding an after-tax non-cash impairment charge of $13.0 million, or $0.68 per share, net income for the second quarter in fiscal 2010 was $4.39 million, or $0.23 per share, which would still mean an increase of 47% in Q2 2011 profits.

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Benjamin Mackovak submits:

If we look at Mariner Energy (ME) in the vacuum of a purely stock trading perspective, and are able to temporarily put aside the tragic human and environmental ramifications that may result from the explosion at the Vermilion production platform yesterday, we see that a skewed risk/return profile exists which favors a short position in ME.

Earlier this year, ME agreed to a take-over by Apache Energy (APA) for cash and stock valued today at roughly $23.36 per share. However the tragedy at Vermilion could put that deal in jeopardy. Should the Apache take-over fall through I think it’s possible ME could trade down to $16 per share.

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James Shaw submits:

The solar sector has became one of the hottest sectors in the US stock market the last few months. This is especially true for most of the Chinese ADRs.

Several stocks are making new year highs, several are nearing their year highs, and several are breaking out of their recent resistance. Even the recent market meltdown cannot bring them down.

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Investing Hobo submits:

China Sunergy (NASDAQ: CSUN) is the smallest of the US listed Chinese solar companies and currently only operates in cell production vertical. At face value, their Q2 earnings (see earnings call transcript here) were quite good. Revenues soared 107% year over year and 23% sequentially to 117m. Earnings were also up significantly as gross margins expanded to almost 20%. Earnings on a per share basis totaled .33 on a diluted EPS basis, compared to .18 EPS reported last year. Not bad for a four dollar stock if they can keep these levels of earnings stable over a longer period.

The advantage of operating in a single vertical is that during boom cycles, CSUN’s level of earnings can look extremely good as they leverage their lower cost structure to meet periods of high demand. The disadvantage of operating in a single vertical is that during down cycles, margins may compress because they don’t have direct control over end sales. CSUN will always rely on the ability of their customers who produce modules to do well. Higher integrated module producing peers have more direct control over costs as well as end demand exposure. As a result, even during down cycles, the level of their business doesn’t fluctuate as wildly as for CSUN. In recent years, CSUN’s quarterly earnings have swung from one extreme to another while some peers have kept their earnings more on a consistent level. The company is in the process of acquiring their sister module manufacturers CEEG (Nanjing and Shanghai), but has experienced delays in completing the merger. If and when this deal is closed, CSUN will operate more as a two vertical module manufacturer much like their larger peer Suntech Power.

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Oil and natural gas company PostRock Energy (Nasdaq:PSTR) was up more than 70% on the Nasdaq yesterday on the announcement of a $60 million equity investment in the company by energy-focused private equity firm White Deer Energy.

As part of the investment, PostRock’s debt will be reduced and its credit agreements restructured.

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Zman submits:

Moratorium Watch: Last night, a federal judge gave Obama the stiff arm on the deep water drilling moratorium by refusing to dismiss the Hornbeck Offshore lawsuit. The Administration had wanted the suit, which dated from the time of Moratorium #1, to be dismissed after it replaced the drilling ban with Moratorium #2. The judge said the Moratoriums are not materially dissimilar and allowed the suit to proceed. Not that it helps the unemployed rig workers today but it should push the Administration to reconsider all types of drilling in the deep water Gulf of Mexico from being banned. Specifically this should play well for ATP (ATPG).

Commodity Watch: Crude oil rebounded $1.99 to close at $73.91 yesterday and was fairly unaffected by the EIA’s weekly report on inventories. In a nutshell the numbers were not too bad and a draw down on distillates was a welcome surprise (see details below). This morning crude is trading off slightly.

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Zacks.com submits:

Canadian Solar Inc. (CSIQ) adjusted EPS of 7 cents in the second quarter of fiscal 2010 ending June 30, 2010, fell short of the Zacks Consensus Estimate of 15 cents and way behind the year-ago quarterly number of 49 cents. The downside came from a sharp rise in expenses, which offset higher shipments year over year. However on a sequential basis the company was able to improve its performance as compared to 3 cents in the first quarter of 2010.

Canadian Solar as of now is undergoing a review by the US Securities and Exchange Commission (SEC) into certain transactions identified in the subpoena issued to the company by the SEC. Earlier in June 2010 the company announced an investigation into the same by its internal audit committee which concluded that the transactions identified in the SEC subpoena were properly accounted in the company’s accounts.

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FuelCell Energy Inc. (FCEL)

Q3 2010 Earnings Call

September 2, 2010 10:00 AM ET

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Greentech Media submits:

by Eric Wesoff

The concentrated photovoltaic (CPV) market has been long on promise and short on results. But there have been a few hopeful signs of late.

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