) -- A solar analyst recently quipped that an investor would have to be a Darwin Award winner to expect bad results from solar companies in the third quarter. Just look at the results from the MAC Global Solar Index (above), which highlights the strong comeback of solar from June's doldrums.

When it comes to the U.S. solar companies, though, a blanket expectation for good results and beat and raise numbers isn't necessarily the way to think about trading solar stocks as a rule ahead of earnings. In fact, the four solar companies presented below provide a good way to break down the diverse expectations and issues for earnings season.

Good results are certainly expected to be the case with

First Solar

(FSLR) - Get Report

, the solar industry bellwether, which kicks off earnings season with its after-market report on Thursday. It's safe to say its report sets the tone for the entire industry.

Some U.S. solar players could post more eye-popping numbers than First Solar, like



, which also reports on Thursday after the market close. Investors have already been given a preview of the potential third quarter pop in inverter stocks from the recent earning pre-report from


( SATC).

First Solar is trading near a 52-week high and the whisper number on Power-One has been going higher. Expectations for these stocks are at a high point, but it's expectations about 2011 that may be the earnings driver. Power-One and its inverter peers have been the big earnings season rally plays in solar over the past two quarters. So the bogey for Power-One won't just be its revenue target, but questions as to whether the mercurial rise of the inverter stocks can be sustained in 2011.

Looking ahead to sustaining solar momentum into 2011, though, isn't the case for

MEMC Electronic Materials




( SPWRA). These U.S. solar companies still have a lot left to prove to investors about 2010.

Both these companies have built in to their earnings expectations execution on key solar project sales in the back-half of 2010. It's put up or shut up time for them, and investors are walking these companies on a short leash, short of proof that the project revenue will be on the books in the second half of the year instead of being pushed out again.

At a larger level, sector-level discussion will dominate earnings discussion. One need only look at the Wednesday commentary from Norwegian solar wafer giant


to gauge the earnings season talking points. REC management said on its earnings conference call that 2011 brings "much more uncertainty...we do expect supply to increase more next year than demand and therefore naturally lower prices."

About solar's biggest market, Germany, REC management said, "in Germany, we have had a fantastic year this year but I think it's almost too good to be true that this will continue into next year... so I think we have to be more modest when it comes to the outlook for next year."

On recent strength in polysilicon and wafer pricing, REC drew the conclusion that the 2010 bottleneck in silicon -- and to a lesser extent wafers -- will not be extended: "with a 30-40% increase

in supply as we see next year, we don't think there will be any bottlenecks next year."

The REC commentary is solar earnings in a nutshell: short of massive blowout earnings numbers, the outlook on pricing and demand for the coming year and the impact of events in key European markets could trump another good quarter for the solar companies.

What follows are some key trends and company-specific issues to watch for in the results to come from the U.S. solar companies.

FSLR Data Debate Point:

There have been 11 upward revisions to EPS in the past 30 days on FSLR, by far the most of the four stocks profiled here. MEMC Electronic Materials is second, with 4 upward revisions to EPS.

Key Earnings Themes:

Eliminating Surprises:

Last quarter, First Solar surprised investors with the revelation of what it called a "manufacturing excursion" that affected 4% of its capacity. In plain English, it was a manufacturing problem with First Solar's much-touted advanced thin film manufacturing process, leading to warranty claims. Many analysts thought the warranty issue -- in particular since First Solar took almost a year to reveal it -- was the reason for the post-earnings selloff. No one seems to be expecting a repeat of the warranty issues given First Solar's manufacturing prowess, but it's certainly an earnings surprise item to watch, and for First Solar investors to hope is a thing of the past.

Management Tone:

First Solar had a reputation under Michael Ahearn of being overly conservative in its outlook. After last quarter's earnings, some analysts were still making the case that First Solar was too sober in its outlook given its earnings performance. A few weeks ago, First Solar released the type of bullish news about 2011 that made it seem to some solar watchers that First Solar had taken a page from the Chinese solar company playbook. First Solar put out a press release stating that it had already received orders for shipments of 380 megawatts above expectations in 2011. First Solar didn't name the clients doing the ordering, or provide any pricing. It is also the first time in the history of First Solar as a public company that it has issued a press release citing anonymous future orders.

Was the 2011 order release a sign that First Solar might be taking a more aggressively optimistic stance headed into 2011?

Project Focus:

The split between First Solar's module sales into the open market and the modules it reserves for its project pipeline has been a major issue since it began making pipeline acquisitions. However, it seems that headed into this earnings call, there is more focus than ever on the project outlook for 2011, as the German "pull-in" of 2010 is expected to end, or at least markedly slow down. Expectations for a slowdown aren't limited to the German market. In the Czech market, a tax on solar power plant revenue should be an issue that First Solar is forced to address. The European situation makes for more pressure from the Street on First Solar to provide confidence about the pipeline headed into 2011.

In the past, though, First Solar has been anything but forthcoming about project details. The last three quarters in row the Street has received the same answer: First Solar says it won't focus on any individual project in its discussion, taking a portfolio approach that is de-risked project to project.

In any event, analysts may be looking for management's response to the Northrop Grumman appeal to the conditional use permit awarded to the AV Solar Ranch project, in the news of late, and an update on the financing and sale of the Agua Caliente project.

Here's the full tale of the earnings tape on First Solar:

Consensus EPS Estimate:

$1.94 per share

Range of EPS Estimates:

$1.44 to $2.26

Earnings Consensus Direction in Previous 90 Days:

up by 19 cents

EPS Revisions up in Last 30 Days:


Previous Quarter EPS:

$1.84 (outperformed Street consensus of 24 cents)

Consensus Revenue:

$778 million

50-Day Moving Average:


Short Interest as Percentage of Float (Nasdaq):


Gain or Loss on Day of Last Earnings:

9% decline

Lowest Share Price Since Last Earnings:

$121.72 (August 20)

Highest Share Price Since Last Earnings:

$151.39 (Sept. 29)

PWER Data Debate Point:

Power-One had the biggest earnings rally of the four stocks profiled here iin the last quarter, with shares up by 20% on the day after its second quarter earnings. Yet Power-One shares have also seen the largest increase in short positions of these four U.S. solar stocks in the past two weeks, the only short interest increase of note, actually, with roughly 4 million short shares added. Short covering can be expected to be a component of any Power-One earnings rally. Power-One is the only of the four stocks profiled here to be at a lower share price today than it was on the day after its last earnings report.

Key Earnings Themes:

Another Blowout Quarter?:

Power-One has been one of the biggest solar earnings outperformers in recent quarters, with revenue increasing by astronomical levels as its has reshaped its business around the sale of solar inverters. At this point, it might take the proverbial Herculean effort for Power-One shares to ride earnings to another share rally. Analysts indicated that expectations are so high for Power-One that the company "would have to blow out expectations by a mile," and provide an implicit beat about the next quarter, as there is already a modest beat embedded in the stock price.

The Guidance Game:

For the first time, Power-One provided revenue guidance concurrent with its second-quarter earnings. Second quarter revenue was up 135% to $215 million. Power-One issued guidance for third quarter revenue of $250 million to $270 million. If expectations are simply met, there could be some profit-taking from investors. That said, considering how large the short position is in Power-One shares, short covering on any outperformance could send shares higher.

Signs of Maturity:

No one expects Power-One to be able to sustain the type of revenue growth and margins it has had in recent quarters -- however, the shorts are betting heavily on this business maturation being an overall negative for Power-One shares. As it matures, and as it faces industry headwinds in 2011, Power-One will be expected to provide more details on its move up to the high-end of the inverter market, as well as into the market for wind inverters. Some analysts argue that pricing for inverter companies is more insulated than pricing for module players and solar installers, being a less "commoditized" part of the solar supply chain. Yet with SMA Solar, the German inverter giant, saying a few months ago the market may weaken to a significant degree in 2011, the pressure will be on Power-One to respond to SMA Solar's sober 2011 outlook.

Here's the full tale of the earnings tape on Power-One:

Consensus EPS Estimate:

23 cents per share

Range of EPS Estimates:

19 cents to 28 cents

Earnings Consensus Direction in Previous 90 Days

: up by 12 cents

EPS Revisions up in last 30 Days:


Previous Quarter EPS:

17 cents (outperformed Street consensus of 10 cents)

Consensus Revenue:

$264 million

TST Recommends

50-Day Moving Average:


Short Interest Increase in Past Two Weeks:


Gain or Loss on Day of Last Earnings:

20% gain

Lowest Share Price Since Last Earnings:

$8.15 (Sept. 17)

Highest Share Price Since Last Earnings:

$13.04 (August 9 -- 52 Week High)

WFR Data Debate Point:

MEMC experienced the biggest share decline of these four U.S. solar stocks in the previous earnings period, down by 19% on the day after its earnings. Yet MEMC shares have experienced the biggest gain since then, up 25%; followed by FSLR at 17%.

Key Earnings Themes:

Finally, a Beat?

The $64,000 question for MEMC is whether it books enough SunEdison business in the quarter to finally beat -- and, maybe even more importantly -- convince the Street that its project business has transitioned from work in progress to working. Saying "trust us, it's coming in the fourth quarter" won't be good enough. There seems to be a sense on the Street that MEMC has provided more reason than SunPower to believe in its project revenue bookings ahead of earnings, simply with the fact that it had sold a 70 megawatt project in Italy, which accounted for almost half of it project sale goals for the year, and more than half of its project target for the second half of the year specifically.

Guidance, or Lack Thereof:

MEMC has not provided quarterly guidance since the end of 2009. Throughout a difficult 2010, MEMC has stuck to a broad full-year EPS and revenue outlook. Last quarter, MEMC told the Street to expect it to exceed its full-year revenue outlook of $1.75 billion to $1.85 billion, but to fall below its EPS range of 70 cents to 80 cents for the year. What some on the Street would like to see is MEMC back in the business of providing quarterly guidance. It makes it easy for MEMC to not miss quarter to quarter when it doesn't even provide a quarterly target to hit, and some analysts are saying that MEMC needs to get back in the game of quarterly targets and proving that it can hit.


There's disagreement on the Street about the impact of wafering on MEMC's business. Wafer pricing has been tighter than ever -- a boon to companies in the solar wafer business. However, because MEMC is in the wafer business through tolling arrangements while it ramps up its in-house solar wafer manufacturing, some analysts think it could get squeezed this quarter. A squeeze from its wafer tolling arrangements could impact wafer margins by as much as 10%, and that's ten points of margin MEMC was expecting to get. It's not an open-and-shut case, though. Some more bullish analysts think pricing in wafers has been so strong that even though MEMC relies on tolling, it will still get a bump from the general tight supply in the market, or tolling will in the worst case scenario zero out any pricing advantage. In any event, the impact of the wafer business on MEMC margins will be an earnings item to watch.

Some on the Street think if there is a negative wafer issue in the third quarter it isn't on the solar side of the business, but in semiconductors. There is downside risk that after two quarters of raising prices, semiconductor wafer pricing may be stable or even decline. As MEMC is just getting back to profitability, analysts remain concerned about any weakness in this market based on a slowdown in consumer electronic segments like PCs.

Here's the full tale of the earnings tape on MEMC Electronic Materials:

Consensus EPS Estimate:

$13 cents per share

Range of EPS Estimates:

5 cents to 26 cents

Earnings Consensus Direction in Previous 90 Days

: down by 10 cents

EPS Revisions up in last 30 Days:


Previous Quarter EPS:

6 cents (disappointed Street consensus of 9 cents)

Consensus Revenue:

$531.3 million

50-Day Moving Average:


Short Interest as Percentage of Float (Nasdaq):


Gain or Loss on Day of Last Earnings:

19% decline

Lowest Share Price Since Last Earnings:

$9.19 (July 30, day after earnings)

Highest Share Price Since Last Earnings:

$13.77 (Oct. 15)

SunPower Data Debate Point:

SunPower has the highest short interest as a percentage of float among these four solar stocks, yet since its last earnings report, the short interest has decreased by more than 2 million shares. Going into its November earnings, SunPower shares short are at their lowest level since last November.

Key Earnings Themes:

Trading on the Pipeline Confidence:

There have been some positive news items of late for SunPower, with Moody's rating projects in Italy and the first sales in the Montalto di Castro solar park, Italy's largest. Yet SunPower is not yet at the point of checking off all the revenue items it needs to check off for fourth quarter revenue from European projects. In one respect, the third quarter earnings are a non-event because SunPower has more or less backed up revenue expectations to the final quarter of the year.

However, given that SunPower won't be reporting until Nov. 11, there will only by seven weeks left in the year by the time it provides its quarterly update. By that time, if SunPower can't provide confidence on the project pipeline, SunPower may go from being a "dirt cheap" stock to suddenly being "too expensive" given the outlook. Analysts say SunPower is priced with a healthy degree of skepticism, and that means shares have room to run if it exceeds expectations, but it also means any further signs of revenue being pushed out and the market will be merciless.

Concurrent with the slowdown in the German pull-in, where SunPower is not affected, there are concerns about the Italian market slowing down in the second half of 2011, so more focus will also be placed on SunPower's project pipeline in North America, where the company has 300 megawatts to 500 megawatts of planned business.

Dealing With Debt:

Clarity on SunPower's debt structure may help ease investor concerns about SunPower being overleveraged. Getting Moody's to rate its bond offerings for the Italian project pipeline was one step. At a larger level, though, when SunPower announced a joint venture with AU Optronics, it helped to alleviate concerns about the over debt plate. Yet some on the Street are still awaiting details on how much debt will be shifted into the joint venture and off the SunPower balance sheet. For a company arguably more reliant than any other company on its project business, a weak balance sheet is a bad thing. And headed into a North American project market where financing may be tight in 2011, with more projects competing for less dollars and less tax equity investors, SunPower showing itself to be a more bankable company by way of a better balance sheet should be a key. SunPower stated in its second quarter earnings that $230 million in debt would be shifted to the JV, and debt to total assets ratio would decline to 33% by the end of 2010.

The flip side of the AU Optronics joint venture is the ramp up of SunPower's Fab 3 and the roadmap to cost reductions for the U.S. solar company constantly facing questions about its premium pricing in the commoditzed module market. SunPower said in its last earnings that Fab 3 would bring down costs from 85 cents of capital spending per watt to 55 cents of capital spending per watt by 2014. An update on cost reductions and how that impacts the overall SunPower cost/pricing equation will be another important item for investors to monitor.

Here's the full tale of the earnings tape on SunPower:

Consensus EPS Estimate:

13 cents per share

Range of EPS Estimates:

6 cents to 25 cents

Earnings Consensus Direction in Previous 90 Days

: decline of 2 cents

EPS Revisions up in last 30 Days:


Previous Quarter EPS:

15 cents (outperformed Street consensus of 10 cents)

Consensus Revenue:

$471.3 million

50-Day Moving Average:


Short Interest as Percentage of Float (Nasdaq):


Gain or Loss on Day of Last Earnings:

9% decline

Lowest Share Price Since Last Earnings:

$9.98 (August 24)

Highest Share Price Since Last Earnings:

$15.20 (Oct. 14)

-- Written by Eric Rosenbaum from New York.


>>Solar Stocks Now a Core Holding, Poll Says

>>Solar Winners: Time to Take the Money and Run?

>>Solar Sector Selloff: JA Solar, LDK Solar, ReneSola

>>Cree Stock: Buy or Sell?

>>Is Solar Pricing Squeeze Just Ahead?

Follow on


and become a fan on


Copyright 2009 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.