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Sell! Trina Solar Revises Q2 Guidance

July 30, 2012

Forget about waiting for actual Q2 results. When a company issues an updated guidance stating shipments are down and there are significant operating expense charges, that’s a reason to run, not walk, away from a stock. Trina Solar (TSL :NYSE) issued such an announcement today.

Despite the quarter being “put to bed” almost a month ago, Trina Solar decided to give a revised range of solar module shipments of 390 to 420 megawatts (MW). Originally the company offered a range of 500 to 520 MW.

Gross margins, originally predicted at 10 percent, will now fall between 7 to 9 percent as Trina Solar is setting aside cash potential countervailing and anti-dumping duties along with a non-cash inventory write down of $26 to $28 million.

And if the news couldn’t get any worse, the company will also be taking a receivables provision of $45 to $48 million for account receivables (ie. bad debt) and a foreign currency exchange loss of $22 to $23 million.

Whether they are trying to put-off the inevitable or hope for a hail mary, Trina Solar is waiting to revise, or stick with, its full-year shipment guidance of 2.0 to 2.1 gigawatts.

Trina Solar is blaming its woes on over capacity in the industry resulting in lower pricing. They are also blaming the tariffs for not reaching their goals in the U.S. and several projects in China being pushed back to the second half of 2012.

With First Solar (FSLR :NASDAQ) set to report this week, today’s news is not helpful to the struggling solar industry. Despite not having to worry about U.S. import tariffs, First Solar still has to deal with the industry’s continued over-supply issues and the resulting falling prices.

Possibly saving shares of Trina Solar from further scrutiny was Suntech Power’s (STP :NYSE) announcement that they were the victims of fraud resulting in the loss of hundreds of millions of euros in German bonds.

Shares of Trina Solar were down 7.58 percent in midday trading while First Solar was down a more modest 3.38 percent. Suntech Power was down a whopping a 15.29 percent.

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