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Yingli Still a Speculative Bet After Mixed Earnings

Yingli Green Energy (YGE)  reported third quarter earnings in the last week of November, and I can only describe them as “mixed”. Revenues were $551 million, below consensus
Founder and President of The Outsider Club, and Investment Director of Early Advantage, Nick Hodge has been in the investment publishing business since graduating Loyola University in 2006. Known for a “call it like you see it” approach to money and policy, his insights have led to numerous appearances on television and in various outlets on the Web, including the Business News Network and Yahoo!'s Daily Ticker. Co-author of two best-selling books on energy investing, Nick has led tens of thousands of investors to ten triple-digit wins and over 220 double-digit wins in the sector. He's also passionate about public policy, population, agriculture, water, and raw materials, and has developed an intuitive approach to using global change for financial gain. He shares his views and strategies across the country, speaking at the New Orleans Investment Conference, the Cambridge House series of conferences, and the Money Show. And Nick's expertise ranges far beyond stocks… In Early Advantage, Nick shows readers how to make money as well as protect and spend it, offering his musings on productivity, taxes, food, the outdoors, and other strategies he uses to get ahead in his own life. When he's not writing, investing, or flying around the world to meet with company executives, Nick can usually be found in a boat on the Eastern Seaboard or on a Maryland farm pursuing the outdoor activities he grew up with and continues to love. You can see his recent media appearances here. @nickchodge on Twitter Nick's Publications: (Wiley), 2007 , The Futurist (Magazine), 2009 , Renewable Energy Focus (Magazine), 2009 "Utility Companies: Adapt, Survive, Thrive" SFO Magazine, 2009 (Wiley), 2013
Founder and President of The Outsider Club, and Investment Director of Early Advantage, Nick Hodge has been in the investment publishing business since graduating Loyola University in 2006. Known for a “call it like you see it” approach to money and policy, his insights have led to numerous appearances on television and in various outlets on the Web, including the Business News Network and Yahoo!'s Daily Ticker. Co-author of two best-selling books on energy investing, Nick has led tens of thousands of investors to ten triple-digit wins and over 220 double-digit wins in the sector. He's also passionate about public policy, population, agriculture, water, and raw materials, and has developed an intuitive approach to using global change for financial gain. He shares his views and strategies across the country, speaking at the New Orleans Investment Conference, the Cambridge House series of conferences, and the Money Show. And Nick's expertise ranges far beyond stocks… In Early Advantage, Nick shows readers how to make money as well as protect and spend it, offering his musings on productivity, taxes, food, the outdoors, and other strategies he uses to get ahead in his own life. When he's not writing, investing, or flying around the world to meet with company executives, Nick can usually be found in a boat on the Eastern Seaboard or on a Maryland farm pursuing the outdoor activities he grew up with and continues to love. You can see his recent media appearances here. @nickchodge on Twitter Nick's Publications: (Wiley), 2007 , The Futurist (Magazine), 2009 , Renewable Energy Focus (Magazine), 2009 "Utility Companies: Adapt, Survive, Thrive" SFO Magazine, 2009 (Wiley), 2013

Yingli Green Energy (YGE)  reported third quarter earnings in the last week of November, and I can only describe them as “mixed”.

Revenues were $551 million, below consensus estimates of $655 million.

Module shipments of 903.4 megawatts squeaked in above the low end of the company's 900-1000MW guidance.

Margins, though, came in much higher than expected at 20.9%, versus guidance of 15-17%.

Full-year guidance was reduced by 400MW to 3.3-3.35GW. That means Yingli will likely be dethroned as the world's solar module volume production leader. Full-year margins were also guided back to 15-17%.

It paints a bad picture. The stock has been pushed down more than 20% since the release and now sits at $2.17.

But a few things were lost in the shuffle, and the bottom line is chief among them.

Cost-Cutting Keeps the Bottom Line Solid

While Yingli missed on the top line, it surprised to the upside on the bottom line. Estimates were for a $0.13 per share loss. The number came in at $0.10.

Also lost was why margins were so much higher than the same quarter in 2013 (20.9% vs. 13.7%). The answer is cost cutting.

Yingli produced panels at $0.48 per watt last quarter. That's only a single penny more than JinkoSolar ($JKS) , the low-cost leader. Because of those low costs, Yingli reported an operating income of $32.5 million – the first time it's done that since the second quarter of 2011.

But it's still hurt by its debt, which it mounted in an effort for growth. It has a total liability of $4.2 billion. And the company is now tackling that. On the conference call, management indicated it's willing to walk away from low and negative original equipment manufacturer revenues and reduced shipment guidance. That wasn't an easy decision, given it meant giving up Yingli's position as volume leader.

That's now two quarters in a row of cost cutting and operational improvements. And costs should fall further. Yingli is cash-flow positive in spite of massive debt. It will be profitable if it can increase average selling prices by a few cents.

I think Yingli remains a decent long-term speculative bet, especially given what's in store for solar stocks in 2015.

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