Solar Trade War: Will These Clean Energy Stocks Weather the Storm?

China and the U.S. are at it again-this time they're arguing over a potential trade war in solar panels. Members of China's solar industry are claiming they want to avoid a trade war; however, a U.S. investigation into China-based panels is pending.

A few weeks ago the U.S. Commerce Department opened a probe into claims by American manufacturers that China was "dumping" low-priced solar panels into the U.S. (subsidized by the Chinese government). The trend has been a headwind for American solar panel makers, among them Solyndra and Evergreen Solar, who have recently gone out of business.

Majority market share
According to the New York Times, Chinese solar panel manufacturers are growing faster than their American counterparts, having raised their American market share to over half, from almost zero five years ago.

A recent statement from the China Chamber of Commerce for the Import and Export of Machinery and Electronic Products (CCCME), which represents their solar industry, said they opposed the U.S. investigation and that their success has only been due to competitive advantages. They also said the firms did not intend to start a trade war with the U.S.

Last Friday, China announced "an investigation into U.S. government policy and subsidy support for renewable energy, including solar equipment," according to CNBC.

Although the U.S. probe threatens China's business, a trade war also threatens business to U.S. solar firms, according to CNBC. China's solar industry association recently said they may ask Beijing "to launch an anti-dumping and subsidy probe into imports of U.S. polysilicon, the raw material used to make solar cells."

Investing ideas
Investors often don't like fighting words, but if you continue to believe in the high growth of clean energy, you may be interested in this list.

We ran a screen on the most profitable clean energy stocks traded on U.S. exchanges, with gross, operating, and pre-tax margins greater than their industry peers.

Do you think these companies will outperform, despite the possible trade war?

List sorted by difference between gross margin and industry. (Click here to access free, interactive tools to analyze these ideas.)

1. Pinnacle West Capital (NYS: PNW) : Provides retail and wholesale electric services primarily in the State of Arizona. Market cap of $5.03B. TTM gross margin at 35.41% vs. industry gross margin at 27.37%. TTM operating margin at 22.32% vs. industry operating margin at 18.65%. TTM pre-tax margin at 15.99% vs. industry pre-tax margin at 14.14%.

2. Donaldson Company (NYS: DCI) : Engages in the manufacture and sale of filtration systems and replacement parts worldwide. Market cap of $4.82B. TTM gross margin at 38.30% vs. industry gross margin at 32.30%. TTM operating margin at 14.24% vs. industry operating margin at 12.93%. TTM pre-tax margin at 14.01% vs. industry pre-tax margin at 11.04%.

3. Stericycle (NAS: SRCL) : Provides regulated waste management and related services in the United States, Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico, Portugal, Romania, and the United Kingdom. Market cap of $6.59B. TTM gross margin at 48.21% vs. industry gross margin at 40.66%. TTM operating margin at 26.73% vs. industry operating margin at 14.52%. TTM pre-tax margin at 21.82% vs. industry pre-tax margin at 11.08%.

4. Dominion Resources (NYS: D) : Engages in producing and transporting energy in the United States. Market cap of $28.96B. TTM gross margin at 30.32% vs. industry gross margin at 27.06%. TTM operating margin at 23.32% vs. industry operating margin at 18.14%. TTM pre-tax margin at 16.77% vs. industry pre-tax margin at 13.43%.

5. US Ecology (NAS: ECOL) : Provides waste treatment, disposal, recycling, and transportation services to commercial and government entities in the United States. Market cap of $319.68M. TTM gross margin at 44.49% vs. industry gross margin at 40.66%. TTM operating margin at 20.53% vs. industry operating margin at 14.52%. TTM pre-tax margin at 18.01% vs. industry pre-tax margin at 11.08%.

6. Waste Connections (NYS: WCN) : Provides solid waste collection, transfer, disposal, and recycling services. Market cap of $3.61B. TTM gross margin at 43.28% vs. industry gross margin at 40.66%. TTM operating margin at 21.44% vs. industry operating margin at 14.52%. TTM pre-tax margin at 18.46% vs. industry pre-tax margin at 11.08%.

7. Republic Services (NYS: RSG) : Provides nonhazardous solid waste collection, transfer, and disposal services in the United States. Market cap of $9.93B. TTM gross margin at 40.86% vs. industry gross margin at 40.66%. TTM operating margin at 19.57% vs. industry operating margin at 14.52%. TTM pre-tax margin at 11.09% vs. industry pre-tax margin at 11.08%.

8. MGE Energy (NAS: MGEE) : Operates as a public utility holding company. Market cap of $983.56M. TTM gross margin at 27.41% vs. industry gross margin at 27.37%. TTM operating margin at 20.09% vs. industry operating margin at 18.65%. TTM pre-tax margin at 18.19% vs. industry pre-tax margin at 14.14%.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Alexander Crawford does not own any of the shares mentioned above. Profitability data sourced from Finviz.

At the time this article was published Motley Fool newsletter services have recommended buying shares of Republic Services, Dominion Resources, and Stericycle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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