Canadian Solar (CSIQ) Q3 Earnings Meet Estimates, Down Y/Y

Solar cell manufacturer Canadian Solar Inc. (NASDAQ:CSIQ) reported third-quarter 2016 earnings of 29 cents per share, in line with the Zacks Consensus Estimate. Reported earnings, however, plunged 63.3% from the year-ago tally of 79 cents per share.

Total Revenue

Canadian Solar recorded total revenue of $657.3 million in the third quarter, missing the Zacks Consensus Estimate of $680 million by 3.3%. Revenues were also down 22.7% from $849.8 million reported in the prior-year quarter.

Of the total revenue, the American markets comprised 41.1%, Asia represented 42.7%, and the European and other markets contributed 16.2%, compared with the respective year-ago contributions of 52.6%, 41.3% and 6.1%.

Operational Update

Solar module shipments in the reported quarter totaled 1,161 megawatts (“MW”), up 1% from the year-ago level of 1,150 MW. The figure, however, fell short of management’s guidance range of 1,200–1,300 MW.

Gross profit was $117.3 million, down 7.5% from the year-ago level of $126.8 million. Gross margin was 17.8% in the quarter, compared with 14.9% in the prior-year quarter.

Total operating expenses were $90.3 million in the quarter, down 5.9% year over year. Operating expenses declined due to lower selling, general and administrative expenses.

Selling expenses totaled $34.0 million in the reported quarter, down 8.8%. General and administrative expenses were $54.6 million, down 5.4%. Research and development expenses were $4.6 million, compared with $4.1 million a year ago.

Interest expenses were $18.8 million, up from the year-ago level of $13.0 million.

Financial Update

As of Sep 30, 2016, cash and cash equivalents were $480.9 million, down from $553.1 million as of Dec 31, 2015.

Long-term debt as of Sep 30, 2016 was $615.8 million, up from $606.6 million as of Dec 31, 2015.

Guidance

For the fourth quarter of 2016, Canadian Solar expects shipments of 1,400−1,500 MW. Total revenue is expected in the range of $600−$750 million, with gross margin of 11–16%.

For the full year, Canadian Solar expects its total module shipments in the range of 5.073–5.173 gigawatts (“GW”), compared to the previous guidance of 5.4–5.5 GW. Total revenue is expected to be in the band of $2.78−$2.94 billion, compared to the previous estimate of $3.0−$3.2 billion.

Peer Releases

SolarCity Corp. (NASDAQ:SCTY) posted an adjusted loss of $2.27 per share in the third quarter of 2016, narrower than the Zacks Consensus Estimate of a loss of $2.35. However, the loss was wider than the year-ago loss of $2.10 per share.

SunPower Corp. (NASDAQ:SPWR) reported third-quarter 2016 adjusted earnings of 56 cents per share, missing the Zacks Consensus Estimate of 67 cents by 16.4%. Reported earnings were, however, much higher than the year-ago figure of 3 cents per share.

First Solar Inc. (NASDAQ:FSLR) reported third-quarter 2016 earnings of $1.22 a share, beating the Zacks Consensus Estimate of 69 cents by a whopping 76.8%. The reported number, however, plunged 64.2% from the prior-year figure of $3.41 per share.

Our Take

Canadian Solar is working on improving both module sales and the downstream energy business. The company has the potential to tap into the growing solar markets of Asia. As of Sep 30, 2016, Canadian Solar had late-stage projects totaling 38 megawatt-peak (“MWp”) in China and 597 MWp in Japan. Solar plants in operation totaled 218 MWp in China and 22 MWp in Japan.

Zacks Rank

Canadian Solar presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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