Evergreen Solar Expected to Report in the Red

Massachusetts-based Evergreen Solar Inc. (ESLR) reported un-audited preliminary results for the quarter ended December 31, 2010. The company clocked $89.3 million in revenues for the fourth quarter of 2010 missing the Zacks Consensus Estimate of $100 million. Results however were higher than both the year-ago and sequential quarterly revenues of $74.5 million and $86.5 million, respectively. Shipments for the fourth quarter of 2010 increased to approximately 47 MW, compared to approximately 43 MW shipped in the sequential quarter.

Average selling price (ASP) for the reported quarter was $1.90 per watt, down 6% from $2.02 per watt reported in the third quarter of 2010. Total manufacturing cost per watt was approximately $1.92, an increase of $0.04 per watt from $1.88 per watt reported for the third quarter of 2010. As a result of the decline in average selling prices and increase in manufacturing costs, gross loss was approximately $0.4 million, versus gross income of $6.5 million during the third quarter of 2010. Evergreen Solar ended fiscal 2010 with Cash and cash equivalents, including restricted cash, of approximately $68.4 million.

Evergreen Solar’s results for both the fourth quarter of 2010 and the first quarter of 2011 would be further affected by expected non-cash charges of approximately $340 million associated with the write-off of existing building, facilities and equipment associated with closing its Devens facility. Furthermore, the company also expects to incur approximately $15 million to $20 million of costs associated with employee separation and outplacement services, facility decommissioning and other costs required to close the facility.

Evergreen Solar is also internally reviewing approximately $150 million of intangible and cash-related prepayments associated with various silicon contracts to determine whether additional non-cash charges will be incurred.

Massachusetts-based Evergreen Solar engages in the development, manufacturing, and marketing of solar power products worldwide, including solar cells, panels, and photovoltaic systems. The company, through its crystalline silicon technology known as String Ribbon, uses approximately half the silicon for manufacturing wafers, compared to peers using the conventional sawing method.

These modules are designed for a range of solar electric power applications, including water pumping, communications, outdoor lighting, rural electrification, recreational vehicles and stand-alone applications. The company sells its products through distributors, system integrators, and other value-added resellers. Its products are sold primarily in the U.S. and Europe.

Evergreen Solar also recently completed a 1-for-6 reverse stock split in 2011. The reverse split reduced the outstanding shares of the company to 35 million from the previous level of 209 million.

Evergreen Solar is expected to release its full numbers for the fourth quarter on February 9, 2010. However the company is expected to take a beating due to lower ASPs and dearer costs of importing aluminum frames for solar panels. We expect Evergreen Solar to digest a loss of 73 cents for the fourth quarter of 2010.

Thus we maintain our long-term Neutral recommendation on the Zacks #4 Rank (Sell) Evergreen Solar stock. In the solar space we would advise investors to focus on the Zacks #1 Rank (Strong Buy) stocks like ReneSola Ltd. (SOL) and LDK Solar Co. Ltd. (LDK) in the near-term.