* Companies eye stellar Q3, encouraging outlook for 2011
* Q-Cells, REC likely to miss EBIT estimates - StarMine
* Trina, SolarWorld likely to beat - StarMine
* Renewable Energy Corp to kick off season Oct. 27
By Christoph Steitz and Sarah McBride
FRANKFURT/LOS ANGELES, Oct 26 Ballooning demand
in the world's largest solar power market, Germany, will help
companies in the sector deliver stellar third-quarter results,
analysts say, and they expect prospects for next year to
Large cuts in feed-in tariffs in Germany, Europe's largest
economy, had fuelled concerns that next year could see a sharp
decline in demand in the country that accounts for about half of
the world market.
But recent analyst estimates suggest this may not happen and
there will be continued strong demand for solar modules in
Germany, arguing it will still be a stable investment despite
Goldman Sachs, for example, expects the market to fall only
slightly next year, with new installations of 7.5 gigawatts (GW)
in solar capacity after an expected 8.5 GW this year.
Analysts said this would prompt companies to present more
positive views about business next year, replacing the cautious
stance major players have held so far on the outlook beyond the
end of 2010.
"We're generally going to see some very strong results.
There has been very strong demand coming from Europe," Matthew
Page, co-manager of the Guinness Atkinson Alternative Energy
Fund (GAAEX.O), said.
"Pricing is being quite firm. And I think the companies are
likely to present a positive outlook for the next 12 months," he
Graphic on comparison of solar companies:
While earnings are expected to come in strong overall, some
companies are still seen either falling short of analyst
expectations or exceeding them, according to Thomson Reuters
StarMine, which weights analysts' forecasts by their track
Above all, European companies are expected to surprise on
the downside, StarMine shows, as Chinese players have been able
to grab significant market share with their low-cost strategy.
"All the German installers seem to have (Chinese companies)
as the top product they all want. They have generally been able
to deliver the volumes people have asked for, and they haven't
messed around their customers on prices," said Guinness
StarMine shows that Norway's Renewable Energy Corp (REC.OL)
-- which will kick off the sector's earnings season on Oct. 27
-- and German solar cell maker Q-Cells QCEG.DE are likely to
release third-quarter earnings far below the Thomson Reuters
REC's third-quarter earnings before interest and taxation
(EBIT) could come in at 153 million Norwegian crowns ($26.57
million), according to StarMine, 37 percent below the 243
million crowns Thomson Reuters I/B/E/S estimate.
The database also shows that U.S.-based First Solar
(FSLR.O), the world's No.1 solar cell maker, LDK LDK.N, and
MEMC WFR.N are also likely to come in slightly below the
Thomson Reuters I/B/E/S estimate.
Meanwhile, China's Trina Solar Ltd TSL.N, SunPower
SPWRA.O, Suntech STP.N, Yingli (YGE.N) and Germany's
SolarWorld SWVG.DE could surprise on the upside.
Companies will also likely release upbeat comments about
business next year, given the strong demand in Germany, where
incentives to meet EU renewable energy targets have made the
country the world's No.1 solar market.
Even though further cuts to the country's solar subsidy will
likely affect volumes to some extent, analysts agree that
investors will still pile in since feed-in tariffs offer a
stable return to generators of solar power.
"I love the German subsidy programme because every year the
world is going to come to an end when the German subsidy
programme is revised. Every year as soon as the programme opens
back up again it sells out like a rock star," Kevin Landis,
portfolio manager at Firsthand Funds, said.
"It's like 'Groundhog Day' or something."
According to Thomson Reuters I/B/E/S, sales of most major
solar players are expected to rise next year, even though some
will only post modest increases.
"It's basically a completely subsidised industry, and the
costs are way too high. As long as there are government
subsidies, someone is going to be able to buy this stuff," said
Ed Mitby, analyst at Van Eck Funds.
(Graphic by Vincent Flasseur, editing by Anthony Barker)