LDK Solar (LDK) Shares Getting Crushed Despite Strong Q4, Guidance; Analysts Weigh In

LDK Solar Co. (NYSE: LDK) posted much better-than-expected fourth-quarter results on Thursday, pushing shares higher in extended trade, but in midday market movement on Friday shares are down 8.16 percent to $11.48.

The solar wafer producer reported fourth-quarter earnings of $1.09 per share, 19 cents better than the analyst estimate of 90 cents per share.

Revenue for the company rose 36.3 percent sequentially and 202.3 percent year-over- year to $920.0 million, topping the market consensus of $870.55 million.

Wafer shipments for the period were 627.9-MW, while modules came in at 157.2-MW.

"Our record results for the fourth quarter capped a remarkable year and demonstrate the success of our vertical integration strategy and strong market position," stated Xiaofeng Peng, Chairman and CEO of LDK Solar. "We delivered a third consecutive quarter of record revenue as strong industry demand drove better than expected results."

Looking forward, LDK sees first-quarter revenue of $800-$850 million, compared to the consensus of $816.4 million. Sees first-quarter wafer shipments of 610-660MW.

For the full year 2011, the company sees revenue of $3.5-$3.7 billion, topping the Street's forecast of $3.06 billion. Sees full year shipments of 2.7-2.9GW.

Analyst Comments:

Collins Stewart maintains a Sell rating on LDK with a price target of $11 on the stock, as the firm remains concerned about oversupply in the second half of 2011. "Oversupply will negatively impact the price and margin potential of LDK’s wafer and polysilicon businesses. LDK is trying to transition to modules to limit its wafer exposure. While a sound strategy, we believe it will be difficult for LDK to achieve its volume targets without be very aggressive on price."

Kaufman Bros. reiterated a Buy rating on the stock, with a $24 price target that represents more than 100% upside in the stock. "We believe the Street is missing the earnings power of the company as we are 58% and 86% above 2011 consensus forecasts for revenues and earnings, respectively. LDK issued guidance for 2011 revenues of $3.5 billion-$3.7 billion with gross margins of 24%-29%. We project 2011 revenue of $3.8 billion versus the current consensus estimate of $3.06 billion."

Soleil Securities reiterated a sell on LDK with an $8 price target. "We continue to believe the key issue for investors to focus on at LDK is the coming overcapacity in the solar wafer business; the likelihood of a significant margin decline in solar wafering; and LDK's annualized rate of earnings declining from the current $4.00+ per share level to below $1.00 per share over the next three to four quarters."

Wells Fargo maintains a Market Perform rating on LDK with a valuation range of $11-$13. "With slowing demand from Italy/France due to policy delays coupled with a weak Japan, we believe order cancellations will be more prevalent for the industry in coming weeks. In our view, the sector could experience an inventory correction in 2Q and pricing will likely need to reset throughout the supply chain to drive demand in lower subsidy regions."

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