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business newsSun Sets on Canadian Solar
By
Justin Sharon
Mar 10, 2011 5:00 pm
The stock imploded 18.10%, a poor performance even on a dire day for equities overall, after its fourth quarter fell short of expectations.
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Gross margins dropped 0.3% sequentially amid higher raw material and input costs, something the panel manufacturer expects to continue into the current quarter. Net income of $25.5 million, or $0.58 cents per share, came in $0.11 light of analyst expectations on an EPS basis. Canadian Solar, which actually makes the majority of its wares in China, is now guiding for gross margins in a range of 14% to 15% in fiscal first quarter, down from the 17% it just posted.
Culprits include declining average selling prices and the Chinese Lunar New Year holiday having adversely impacted production schedules. CEO Shawn Qu said, “We believe that, while European markets will continue to dominate the solar business in 2011, non-European markets can, in some segments, support higher…rates of growth than traditional European markets.” That is important, as the continent’s previously generous solar subsidies are soon to sunset and Italian customers appear especially impatient to delay key orders at the moment.
To be fair, the company’s sales to the US and Asia were extremely strong, overall revenue rose 78%, and annual shipments in 2010 got a big upward jolt, to 803 MW from 310 MW in 2009. Alternative energy as an investing theme is here to stay -- if an erstwhile oilman like J.R. Ewing suddenly went solar last summer, he will be even more of a believer with oil above $100 a barrel and Saudi Arabia hours away from a "day of rage."
But this sector, and specific stock, will never be one for the risk averse. Though today’s peak-to-trough plunge was the drop biggest in nine months, Canadian Solar was already well in the red for the past year having been dogged by accounting issues for much of 2010, so buyer beware. In 1821, an Edinburgh newspaper called the Caledonian Mercury coined the famous phrase “the Empire on which the sun never sets.” Today, it just did.
Please see A Ray Of Sunshine: First Solar, Canadian Solar, JA Solar, US Investing More in Solar Energy, and Proof That Solar Power Works.
Speaking of daylight savings, it starts on Sunday, and while today’s youth are no more likely to consult a watch than a sundial, enough of us old fogies are apparently still wearing one on their wrists, for Swatch Group AG is having the time of its life. Although shares of the world’s biggest watchmaker were dragged down with the overall market today, they are still up about 43.06% in the past year.
The company recently reported record revenue and profit for 2010, the year time finally ran out for its founder. Swatch had 1.8 billion Swiss francs of cash on hand and hired 1,600 employees in the 52-week period. Shares in the company famous for its brightly colored products trade appropriately enough on the pink sheets in America under ticker symbol SWGAY.
The Bienne-based outfit, whose other brands include Omega, Longines, and Tissot, is widely credited with saving the Swiss watch industry from a soup kitchen upon its introduction in 1985. (To journey back in time to that year, click here.) Its fantastic plastics beat back the Japanese digitals, which were then dominant. Twenty-six years on, Swatch shows no signs of slowing down with CEO Nick Hayek today hailing “double-digit sales growth in January and February.” He added, “All segments see extraordinary demand and all markets, with the exception of Greece and” -- natch -- “Japan, are growing.”
Heightened competition from luxury goods giant LVMH, which earlier in the week picked up Italy’s Bulgari for 3.7 billion euros, is a potential ticking time bomb. But with breakneck emerging markets growth, Swatch is setting its sights on record sales of more than 7 billion francs this year.
If you find yourself with time on your hands, turn to Switzerland’s Alpine Cash Inflows, Navy Man Auctions His Watch for $9.95, Gets $66,100, and Fossil Keeps Ticking, But Is It Time to Play?
Coldwater Creek Inc. (CWTR) ended up one without a paddle, down 10.31% on a much wider-than-expected fourth-quarter loss while same-store sales tumbled more than 20% on an annual basis. The Idaho outfit, founded in 1984, offers assorted women’s apparel, accessories, and jewelry at about 375 locations. It reported $0.37 a share of red ink, some $0.11 worse than Wall Street was expecting, and net sales of $252.1 million, down 21%, also came in considerably short of consensus at $282.7 million.
This specialty retailer has suffered from several fashion missteps in the past year, shuffling upper management to apparently no avail, for we have been here before. It is declining to give forward earnings guidance, citing "reduced visibility" on turnaround plans, and such uncertainly will always unnerve investors. Richard Jaffe, a researcher at Stifel Nicolaus, wrote, in a note “that numerous changes are necessary”, and analysts at UBS have also cut their price objective to $3 on the Neutral-rated name.
Coldwater was until recently able to boast a five-year compound annual revenue growth rate of 12%, but those days likely are over. Among its best-selling items is a necklace made of “found objects.“ Right now, however, this is a firm that has lost its way.
Breaking Up With Coldwater Creek, Chico’s May Be the Last Brand Standing for Older Women, and Five Worst-Performing Small Caps has more.
Smithfield Foods Inc. (SFD), the world’s biggest hog producer, showed again that pigs won’t fly even in the face of impressive earnings. Shares slipped 1.63% despite posing fourth-quarter results ex-items of $0.84, some $0.16 ahead of consensus estimates. Packaged meats were a standout, coming in at $125 million, and hog production profit of $3.5 million significantly outperformed spot margins. Fresh pork profits of $18/head also reached record margins.
The pork industry recently unveiled an "inspiring" new slogan to replace its long-running “The Other White Meat;” introduced in the crash year of 1987 -- let’s hope the current catchphrase isn’t a similar kiss of death for the stock market.
Fellow meat firm Tyson Foods (TSN) -- no, not that Tyson foods -- caught the ear of investors yesterday, gaining 4.31% after an analyst upgrade. It has posted eight consecutive quarters of earnings outperformance, and both Tyson and Smithfield should benefit from the secular shift to protein.
However, there are headwinds. Smithfield CEO C. Larry Pope today said, “I would not be at all surprised if there was a minor drop in volume as consumers react to something cheaper. They could rotate to chicken.” Higher-than-expected feed costs and an increase in the number of piggies going to market are also negative overhangs, as is an increase in North American ethanol production that has pressurized corn prices (corn makes up about 85% of a pigs’ diet.) This is a fine long-term “feed the world stock,” but expect near-term volatility. And in conclusion, well there’s only one more thing to say.
Sink your teeth into Why Pork Is Poised for a Rebound, How Livestock Prices Are Influencing Relative Food Price Inflation, and The Future of Food Prices: Meat.
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No positions in stocks mentioned.
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