JIASHAN, China ( TheStreet) -- ReneSola ( SOL - Get Report) beat the Street on revenues and narrowed its loss more than expected in the fourth quarter, but its gross margins and operating margins declined from third-quarter levels.

Continuing depression in the prices of wafers and a high-cost inventory of raw materials contributed to a gross margin level of 2.7% in the fourth quarter, versus 3.4% and 5.1% in the previous two quarters.

Operating margins in the fourth quarter were down 11.4%, versus declines of 5.5% and 4.8% in the previous two quarters of 2009.

Shares of Renesola were down between 3% and 4% in the pre-market session. Solar investors have been sour on sector shares that have underperformed on margins in this fourth quarter earnings season.

ReneSola is predicting gross margins of 16% to 18% in the first quarter of 2010 and 17% to 20% for the full year 2010, with stabilizing polysilicon prices and increased wafer spot pricing.

Charles Bai, ReneSola's CFO, said, "During the fourth quarter of 2009 ... we worked through the remainder of our high-cost raw materials and expect first quarter 2010 polysilicon cost to be below US$60 per kilogram. We also reduced our average wafer processing cost significantly to approximately US$0.34 per watt. With anticipated further cost reductions in each segment of our business and continuing strong demand for our products and services, we expect to return to profitability in the first quarter of 2010."

ReneSola expects to ship 215 megawatts (MW) to 230 MW in the first quarter.

For the full year, ReneSola expects shipments of 900 MW to 950 MW.

Average sales price of solar wafers will decline by 10% to 15% in the second half of the year, according to ReneSola's estimate, though many analysts expect the price declines in solar to be closer to 20% on average.

In its March 2009 full year-predictions, ReneSola had estimated revenues of $650 million to $700 million and full year shipments of 620 MW to 670 MW.

Visibility for the full year during the first quarter is a tricky thing in solar, though. ReneSola's actual year-end revenues were $510 million and 526 MW shipped.

ReneSola shipped a record 202.9 MW in the fourth quarter of 2009. Net revenues in the quarter of $180 million easily beat a street estimate of $167 million.

ReneSola's earnings per share loss of 6 cents was also two cents less than expected by the Street.

Revenue outperformance has not led to a share rally in other recent solar earnings. Yingli Green Energy ( YGE) was the latest solar company to report revenues that exceeded street forecasts but disappointing margins, and Yingli's shares declined after its earnings.

Yingli's total operating expenses doubled in the fourth quarter, and the same operating expense increase was evident in ReneSolar's earnings.

Total expenses in the fourth quarter were $25.3 million, an increase from $12.5 million in the previous quarter. A one-time $14.6 million charge against "doubtful receivables" from a semiconductor company was the primary culprit. ReneSola had previously announced that it had sold its stake in the semiconductor company.

-- Reported by Eric Rosenbaum in New York.


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