UPDATE 1-STR Q3 profit beats, margin worries pull down shares

Fri Nov 12, 2010 12:22pm EST

* Q3 adj shr $0.39 vs est of $0.37

* Co raises FY earnings view

* Margins may have peaked - analyst

* Shares down 20 pct

By Arup Roychoudhury

BANGALORE, Nov 12 (Reuters) - Solar company STR Holdings Inc (STRI.N) reported market-beating adjusted profit for the third quarter and raised its full-year earnings forecast.

Shares of the company, however, fell 20 percent amid investors' concerns that margins have peaked and would weaken in the coming quarters.

"STR has been pretty clear that their margins will go down over time but at this point there may be investors realizing that second quarter is as high as it can get and they are going downhill from here in 2011," Battle Road Research analyst David Arcaro said.

Enfield, Connecticut-based STR did not give quarterly margin numbers.

Solar firms' sales have surged this year on strong demand, but declining subsidies in Germany and other European countries threaten to compress profit margins as the companies cut prices for their products.

Earlier in the week, China's JA Solar Holdings Co (JASO.O) and Solarfun Power Holdings Co Ltd SOLF.O posted solid results and signaled strong demand, but their shares fell amid margin worries. [ID:nSGE6A80ON]

STR's July-September adjusted profit was $16.6 million, or 39 cents a share, compared with analysts' estimates of 37 cents a share, according to Thomson Reuters I/B/E/S.

For 2010, the company forecast earnings of $1.47-$1.51 a share, up from $1.35-$1.45 a share earlier. [ID:ASA012CI]

Shares of STR, which have more than doubled since the company went public in November last year, were down 15 percent at $20.80 in midday trade Friday on the New York Stock Exchange. They touched a low of $19.51 earlier. (Reporting by Arup Roychoudhury in Bangalore; Editing by Unnikrishnan Nair)

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