Solar Stock Winners: GT Solar

NEW YORK (TheStreet) -- When the outlook is uncertain in solar, it's better to be an equipment maker. That's one way to read the results from solar equipment maker GT Solar(BWEN), which posted a "beat and raise" in its third-quarter earnings and is receiving a bump from investors on Monday.

The GT Solar rally -- with shares of the solar equipment maker up 8% on Monday on heavy volume trading -- was in stark contrast to results last Friday from Chinese wafer maker ReneSola(SOL). ReneSola also turned in a "beat and raise" quarter. ReneSola's outlook for 2011 included all the right words about pricing and demand remaining stable -- and still investors sold out of ReneSola shares on Friday and Monday.

In this way, solar takes a page from the semiconductor space, where the cycle for the equipment makers, and any potential downturn, has a longer lag time than that for the companies directly in the supply chain. The company increased its fiscal year 2011 guidance range for revenue to $775 million to $850 million, up from the previously provided range of $700 million to $775 million.

Stifel analyst Osbourne said that GT Solar's outlook for solar was positive, with the vendors in the space moving down the road to greater vertical integration and boosting its sales of equipment. The Chinese solar companies are also flush with cash after the government doled out close to $40 billion in loan packages in 2010. ReneSola is an example of the ongoing vertical integration, ramping up its in-house polysilicon plant even as its core business is solar wafers. "Even if people are concerned about pricing and demand for solar next year, it would be a quarter or two after for GT Solar," the Stifel analyst said.

Yet that's only a small part, and not an unexpected part, of the GT Solar earnings rally.

GT Solar is rallying for a number of reasons that are distinct from the cyclical disparity between equipment and solar supply plays. For one, the company announced an immediate 26.5 million share repurchase program. There has been an overhang on GT Solar shares for years based the continued selling activity by private equity investors that have been gradually reducing their stake in the solar equipment company. Every few months it seems that the private investors sell a block of GT Solar shares and the stock sells off.