Is Yingli Green (YGE) Poised to Beat on Q3 Earnings? (Revised)

Yingli Green Energy Holding Co. Ltd. (YGE) is scheduled to release its third-quarter 2014 results on Nov 25. We expect the company to beat expectations when it reports its earnings results on the day.

In the preceding quarter, Yingli Green had delivered a negative 52.94% earnings surprise. Let us see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model indicates that Yingli Green will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is the case here as you will see below.

Positive Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +38.46%. This is because the Most Accurate Estimate stands at a loss of 8 cents per share while the Zacks Consensus Estimate stands at a loss of 13 cents.

Zacks Rank: Yingli Green currently has a Zacks Rank #3. The combination of Yingli Green’s Zacks Rank #3 and +38.46% ESP makes us confident of an earnings beat this quarter.

Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating estimates. Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

What's Driving the Better-than-Expected Earnings?

Yingli Green has witnessed a consistent growth in its order book for the past several quarters. Continuing the trend, the company has received a steady inflow of orders in this quarter as well.

In Aug 2014, Yingli Green had entered into a partnership with Push Energy Ltd., a developer of renewable energy, to supply 66 megawatts (MW) of solar photovoltaic (PV.V) modules to four projects located in the UK. In September, it also signed a deal to provide more than 24 MW of solar PV modules for the Pavana Solar Park in Honduras.

It is also worth noticing that the company is steadily expanding its global footprint outside China. Apart from strengthening its operations in China, it has increased its focus on other markets like Latin America, UK and Japan. These initiatives will likely boost the company’s revenue.

Moreover, with China overtaking Germany to become the world leader in total electricity generation from renewable sources and the Chinese government rolling out new policies to promote clean energy, the company is likely to be benefitted.

Also, with demand for solar energy rising in emerging economies like Japan and India, other solar manufacturers like JinkoSolar Holding Co. Ltd. (JKS), Trina Solar Limited (TSL) and Canadian Solar Inc. (CSIQ) are keen to break into these markets. Based in China, Yingli Green will have a competitive edge over its peers because of the geographical proximity, thus translating into higher revenues for the company.

(We are reissuing this article to update a data. The original article, issued on Nov 10, 2014, should no longer be relied upon.)

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