Earlier this year, when the Deepwater Horizon rig exploded, energy policies were thrust into the spotlight. For as long as oil leaked into the Gulf of Mexico, many policymakers discussed alternative energies and stiff oil drilling regulations to help prevent not only another accident, but to help wean the U.S. off of its fossil fuel dependence. But since the well was officially sealed in late September, it seems that energy has been hiding in the shadows of numerous issues that currently weigh on global economies. As international affairs burden markets, investors are forced to deal with the more immediate issues, and it seems like the energy sector as a whole has remained dormant [see also Three ETFs To Watch If Roubini Is Right About Europe].
Today, Trina Solar Limited (TSL), a China-based clean energy firm, is set to give its report from its most recent quarter. Trina Solar is a manufacturer of photovoltaic modules, and sells its products all across the globe, focusing on nations that have government incentives that support the adoption of solar energy (like the U.S. or France). While many Americans have put alternative energy on the back burner, a surging cost of crude may combine with the limitless potential of solar power to reinvigorate demand in the sector. In fact, all of the energy stored in the Earth’s reserves of oil, coal, and natural gas only adds up to just 20 days of sunshine, showing how immense an impact solar energy could some day have on the global energy market [see also Friday The 13th Special: Three Unlucky ETFs].
TSL will report its earnings before market open today, and it has high expectations to meet. Analysts have predicted an EPS of $0.87, with revenues reaching the $420 million mark. This compared to last quarter when the firm had EPS of just $0.50, showing the growth that many market experts expect out of the firm. TSL has not missed earnings marks in over a year, pointing to careful fiscal management that will hopefully pay off for investors today. Another factor to consider with any clean energy firm is oil prices; typically as oil prices rise, clean energy firms tend to gain, and vice versa. But this past quarter has seen oil prices fluctuate heavily, so the extent to which it could effect any one company is nearly impossible to measure [see also Five Ultra-Concentrated ETFs].
With this earnings announcement set for today, the Market Vectors Solar Energy ETF (KWT) should be active in trading. This fund tracks the Ardour Solar Energy Index, which provides exposure to publicly traded companies from around the world that derive at least 66% of their revenues from solar power and related products and services. Trina Solar comes in as the fund’s top holding, accounting for just over 10.7% of the assets, giving it a heavy influence on KWT. The ETF has had a rough year, losing over 30% while exhibiting a beta of 1.8, suggesting that it has been extremely volatile when compared to the overall market. If Trina Solar meets their marks later today, look for KWT to rise. On the other hand, a poor earnings report could turn the lights out on this ETF and the rest of the alternative energy sector to close out 2010.
Disclosure: No positions at time of writing.