Zacks Analyst Blog Highlights: Moody's, Freddie Mac, ReneSola, SunPower and Evergreen Solar

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Mar 02, 2011, 09:30 ET

CHICAGO, March 2, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Moody's Corp. (NYSE: MCO), Freddie Mac (Nasdaq: FMCC), ReneSola Ltd. (NYSE: SOL), SunPower Corporation (Nasdaq: SPWRA) and Evergreen Solar Inc. (Nasdaq: ESLR).

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Here are highlights from Tuesday's Analyst Blog:

2011: Right Time to Buy a House?

According to the analysts of Moody's Analytics, a wing of Moody's Corp. (NYSE: MCO), houses are most affordable now than they have been in decades. In some areas, prices have already plummeted below the valuation level prior to the housing bubble, which peaked in early 2007.

Considering home prices and peoples' income, analysts said that, nationally, total household income for 19 months of an average family is now sufficient to buy a house. Notably, this is the lowest price seen in 35 years. Though prices vary across the nation, two years' income is the standard to buy a house.

In January, Freddie Mac's (Nasdaq: FMCC) chief economist, Frank Nothaft, said that housing prices are expected to bottom by spring 2011. Also, Mr. Nothaft expects a gradual price increase in 2012. This expectation is based on historically low mortgage interest rates and other positive economic signs such as a small drop in the unemployment rate, increased purchases of durable goods and diminishing delinquencies.

However, in some regions including Florida, Nevada and California, the housing market is expected to recover erratically as these areas were severally affected by the financial crisis.

Also, if we assume a symmetrical pattern in the housing price curve, going back to the pre-bubble level would take about seven years as it took a similar time period to reach at the top. Consequently, the final bottom is not expected to be touched before 2013-2014, if the curve follows a symmetrical pattern.

ReneSola Posts Record Revenues

Before markets opened today, ReneSola Ltd. (NYSE: SOL) reported fourth quarter and fiscal 2010 results. In the reported quarter the company clocked adjusted Earnings Per American Depositary Share (EPADS) of 69 cents per share, in line with the Zacks Consensus Estimate and beating the year-ago quarterly loss of 33 cents.

Fiscal 2010 EPADS of $1.93 however came below the Zacks Consensus Estimate of $1.95. Earnings in the reported fiscal were way ahead of the 98-cent loss per ADS digested by the company in fiscal 2009.

Guidance

Reflecting the robust market demand for solar products, ReneSola for the first quarter of 2011 expects total solar wafer and module shipments to be in the range of 320 MW–330 MW, revenues to be in the range of $310 million–$330 million and gross profit margin to be between 30%–32%.

For fiscal 2011, ReneSola expects total solar wafer and module shipments to be in the range of 1.6 GW to 1.7 GW, representing an increase of 35% to 44% year over year.

Our Take

The fortunes of ReneSola look greener with a geographically-diversified customer base, ongoing expansion programs, subsidy programs, improving operating efficiencies, rising margins and material cost savings through its vertically-integrated production structure.

Till date ReneSola has over 20 long-term wafer contracts totaling 1.3 GW for 2011. To cater to the growing demand ReneSola expects to spend $350 million in fiscal 2011 to expand annualized wafer production capacity from the current 1.3 GW to 1.9 GW.

Simultaneously the company plans to increase annualized module production capacity from the current 400 MW to 600 MW and polysilicon capacity from the current 3,000 MT to 8,500 MT.

ReneSola at the same time is proactive on cost control. The company's prudent control over raw material procurement coupled with increasing in-house polysilicon capacity has provided protection against rising polysilicon spot prices. In the reported quarter the company was able to reduce its non-silicon wafer processing cost per watt to 24 cents and keep its polysilicon raw material cost in the range $55/kg–$60/kg.

ReneSola also has developed a new multicrystalline wafer, the Virtus Wafer. The Virtus Wafer, which achieves an average cell conversion efficiency rate of 17.5%, more than 1% higher than the industry standard. The company expects to commence pilot production of the wafer in fiscal 2011 itself.

We feel the Zacks #1 Rank (Strong Buy) stock would open up a small window of opportunity for investors in the near term (1 to 3 months). Over the longer run we are Neutral on the company in line with its peers like SunPower Corporation (Nasdaq: SPWRA) and Evergreen Solar Inc. (Nasdaq: ESLR).

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