Massachusetts-based Evergreen Solar Inc. (ESLR) reported third-quarter 2010 loss per share of 13 cents, more than double of the year-ago quarterly loss of 6 cents. This is also higher than the Zacks Consensus Estimate of a loss of 11 cents.
Operational Results
Evergreen Solar’s revenues for the third quarter of 2010 were $86.5 million, up 2.4% and 11.4% compared with second-quarter 2010 revenues of $84.5 million and year-ago revenues of $77.7 million. Revenues however, were below the Zacks Consensus Estimate of $88 million.
Shipments increased 7.2% sequentially to 42.6 MW from 39.8 MW in the second quarter 2010. Average selling price in the reported quarter was $2.02 per watt, down slightly from $2.04 in the second quarter of 2010.
Gross margin in the reported quarter was 7.5%, compared to 8.6% in the second quarter of 2010. The decrease in gross margin resulted primarily from the decrease in royalties associated with the licensing of the company’s proprietary wafer technology.
In the second quarter of 2010, the company recorded royalty revenues of $3.4 million, which included a one-time payment of $2.4 million associated with the sale of its joint venture – Sovello, to Ventizz Capital Partners. Sovello was a three-way joint venture among Germany based Q-Cells, Norway based Renewable Energy Corporation and Evergreen Solar.
Evergreen Solar’s operating loss was $22.7 million, compared to $15.5 million in the second quarter of 2010. Operating loss in the reported quarter increased due mainly to a $6.4 million charge relating to the write-off of a receivable from a Korean customer and a decrease in royalty revenue. This was partially offset by a decrease in manufacturing costs. Evergreen Solar’s net loss was $27.2 million compared to $3.3 million in the second quarter of 2010.
Financial Condition
Evergreen Solar used cash of $24.1 million for operations in the first nine months of 2010, compared with $54.0 million used in the year-ago period. Cash and cash equivalents at the end of the reported period were $93.3 million compared with $91 million at the end of the year-ago period. Convertible notes outstanding increased to $386.9 million at the end of the reported period from $323.3 million at year-end 2009.
Outlook
Evergreen Solar’s geographically diversified contractual backlog, ongoing expansion programs, improving operating efficiencies and up-gradation in technology will help maintain its positive momentum. We expect Evergreen Solar to narrow its losses in fiscal 2010 with a loss per share of 35 cents compared to a loss of 53 cents in fiscal 2009.
However, continuing near-term losses due to start-up costs, capital expenditures, apprehension over a subsidy roll-back in Germany and earnings dilutive stock issuances may stunt the near-term share price upside potential.
We maintain our long-term Neutral recommendation on the Zacks #4 Rank (Sell) stock.
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