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LDK Solar


is one of two solar earnings reports expected after the market close on Tuesday, and like


( SPWRA), the long-term outlook for LDK Solar may prove more important that the quarterly earnings performance.

Both LDK Solar and SunPower have room to provide earnings upside to the Street expectations, and for LDK, any earnings upside would be a repeat of its first quarter earnings beat.

>>SunPower Costs Still the Key: Earnings Preview

LDK beat the Street in the first quarter, reporting earnings of 6 cents per share, versus a Street estimate of one cent earnings.

LDK improved its revenue sequentially and versus the prior year in the first quarter 2010, posting net sales of $347.6 million.

LDK also made strides with its gross margin profile in the past quarter. Gross margin for the first quarter was 15.7%, compared to 9.9% in the fourth quarter of fiscal 2009, and 1.7% in the first quarter of fiscal 2009.

The Street is expecting earnings of 22 cents from LDK in the second quarter on revenue of $458 million.

The Street consensus also calls for LDK Solar earnings and revenue to decline in the second half of 2010, leaving room open for earnings upside. In the next quarter, the Street is only projecting earnings of 16 cents from LDK and revenue of $422 million.

The Street consensus on second quarter revenue is below LDK Solar's previous revenue guidance of a range between $460 million and $490 million. The Chinese solar company forecast wafer shipments of 460 megawatts to 480 MW, and module shipments between 60 MW and 70 MW, in the second quarter.

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For fiscal 2010, LDK previously forecast revenue to be in the range of $1.6 billion to $1.7 billion, with wafer shipments between 1.7 gigawatts and 1.8 GW, and module shipment between 200 MW and 300 MW.

Even though LDK Solar beat the Street in the first quarter, its shares did not rally on the earnings. LDK shares began a slide after its May 10 earnings report and fell as low as $5 in June. LDK shares were trading at $7.24 on Tuesday, and had recently been trading at their highest price since May as part of the solar sector rally. However, profit taking could be on tap for any stock in the solar sector given the recent gains and short-term mentality of solar investors.

JA Solar beat on the top line in its Tuesday morning earnings report, and upped its shipment guidance for the year, but sold off heavily, leading the solar sector down in Tuesday's trading session.

>>JA Solar EPS at Odds With Outlook

In 2010, the Street has been focused on LDK Solar's ramp-up of its polysilicon production plant, and an update on that progress being made with the plant may outweigh the quarterly performance. LDK reportedly had a small fire at the polysilicon plant in recent weeks, though analyst Paul Leming said the incident appeared to be minor.

In the previous quarter, LDK Solar said it expected the benefits from its polyisilicon production plant ramp to increase. In the first quarter, LDK produced 700 metric tons of polysilicon in total, split between LDK's 1,000 metric ton plant and the first 5,000 metric ton line from its planned 15,000 metric ton plant. LDK said in its first quarter earnings that progress was being made on a monthly basis with its first polysilicon ramp.

LDK Solar also has been nagged by its debt plate, with total debt of $1.9 billion, versus a total asset base of $4.5 billion.

-- Written by Eric Rosenbaum from New York.


>>JA Solar EPS at Odds With Outlook

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