NEW YORK (
) -- The upcoming earnings reports from the solar sector are roundly expected to demonstrate the high demand level ahead of European solar feed-in tariff cuts, and an early indication of the level of solar demand came courtesy of
Amtech, which makes the solar furnace equipment to produce solar cells, preannounced fiscal third quarter revenue on Wednesday that blew by Street estimates. Amtech said that preliminary revenue for the quarter is at $42 million, with $37 million specifically from its solar business.
Analysts had expected $36 million in Amtech Systems revenue.
Amtech Systems total orders for the first three quarters of the year reached $135 million, higher than annual order levels for Amtech Systems in any previous year.
Yingli Green Energy
was among the companies to announce an Amtech order in the past quarter.
Shares of Amtech rose by 8.5% on Wednesday, and the thinly traded stock -- it averages daily trading volume of 36,000 -- experienced trading of more than 337,000 shares by early Wednesday afternoon.
The record revenue of approximately $42 million represented a 161% increase over the preceding quarter, and 227% increase over the third quarter of fiscal 2009. Bookings of $44 million in the quarter were also at a record level.
Amtech shares gained 73 cents to a share price of $9.34 on Wednesday afternoon.
Amtech Systems sells the fusion furnaces that produce solar cells, and has a 35% market share, according to solar industry estimates. The company's revenue beat was no surprise, as Amtech has pre-announced higher solar orders for three consecutive quarters. Based on its 35% market share, analyst Gordon Johnson of Axiom Capital estimates that Amtech orders at the level of $135 million in 2010 support a solar cell capacity of 3.5GW. The 3.5GW in 2010 would represent more orders than Amtech had in the previous three years combined, including the solar boom year of 2007.
The story will be more complicated than furnace sales for the major solar module makers like
( SPWRA), and Yingli Green Energy.
For the Chinese solar stocks, currency charges could continue to be an issue in the upcoming earnings reports, though many of these companies made moves during the past quarter to limit the negative impact of the euro's second quarter slide. First Solar and SunPower will continue to massage the message of their moves into the lower margin large-scale solar project space. Some module makers, including SunPower and Suntech Power, will have to face the constant barrage of questions about their cost structure, while
deals with the fallout from the ongoing Securities and Exchange Commission investigation of its sales accounting practices.
Yet what the Amtech report shows is that the overall ability of the solar sector to absorb demand is not going away as a theme. The furnaces shipped in the most recent quarter by Amtech would in most cases not start production until the end of the second quarter. The high demand will not just be feeding the solar cell furnace, then, but also fueling the ongoing debate about the ability of the solar industry to absorb the ever-increasing capacity in the second half of 2010 and 2011 as feed-in tariffs are reduced in Europe.
Pricing has held up better than expected, according to many analyst channel checks, though some analysts indicate prices have started to come down in the third quarter. Demand in the third quarter is strong ahead of the German feed-in tariff cuts.
However, as Amtech Systems' earnings beat demonstrated on Wednesday, solar investors will face a familiar question in this earnings season, even if it is a season of outperformance:Iis solar sector overcapacity on the way for 2011 and going to result in significant margin deterioration?
-- Written by Eric Rosenbaum from New York.
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