Trina Solar Limited (TSL)’s Upside Driven By Margins

Trina Solar Limited (TSL)’s Upside Driven By Margins

Trina Solar Limited (ADR) (NYSE:TSL) (FRA:TR3) released the results from its most recently completed quarter on Wednesday, posting earnings of 37 cents per share on $444.8 million in revenue. Analysts had been expecting earnings of 3 cents per share on $452.55 million in revenue. Both Jefferies and Deutsche Bank noted that strong margins were the main driver of Trina’s huge earnings upside.

Trina Solar also shifts into U.S. and Japan

In a report dated May 21, 2014, Deutsche Bank analysts Vishal Shah, Jerimiah Booream-Phelps and Susie Min note that Trina Solar Limited (ADR) (NYSE:TSL) (FRA:TR3) did report the sale of a 50 megawatt project. They also say the company has been shifting into markets with higher average selling prices like the U.S. and Japan, which made up about 62% of shipments during the first quarter.

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They say the Chinese solar company’s progress was “encouraging” and that it reinforces their long-term view of the company. However, they believe investors need to see more policy resolution from the U.S. and China in order for Trina Solar Limited (ADR) (NYSE:TSL) (FRA:TR3) shares to outperform consistently. The Deutsche Bank team thinks the company’s stock will remain range-bound until the resolutions between the two companies are taken care of.

However, they do see the first quarter results as being a “notable affirmation” that the company has the potential for solid earnings power. They reiterated their Buy rating and $17 per share price target.

Trina Solar expected to have strong shipments going forward

In another report dated May 21, 2014, Jefferies analysts Joseph Fong and Howard Lau focus more heavily on gross margins than the Deutsche Bank team did, although they did mention it. They say Trina Solar Limited (ADR) (NYSE:TSL) (FRA:TR3)’s gross margins expanded by 550 basis points, again pointing to higher average selling prices because of the mix shift in geography. The Jefferies team also noted that even though there were market pressures during the quarter, Trina still managed to see higher average selling prices. They also highlighted the sale of the Wuwei project and also cost controls.

Trina Solar Limited (ADR) (NYSE:TSL) (FRA:TR3) management guided for second quarter shipments of betwee 950 and 1,010 megawatts. They also reiterated their full-year guidance of between 3.6 and 3.8 gigawatts of shipments for the full year. Trina also expects to finish between 400 and 500 megawatts of downstream PV projects by the end of the year.

The Jefferies team reiterated their Buy rating on Trina Solar Limited (ADR) (NYSE:TSL) (FRA:TR3) but bumped their price target up slightly from $23.70 to $23.90 per share.

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