Canadian Solar Inc. Earnings Cheat Sheet: Margins Shrink on Rising Costs

Canadian Solar Inc. (NASDAQ:CSIQ) reported a drop to a loss in the third quarter driven by higher costs. Canadian Solar designs, develops, manufactures, and sells solar cell and solar module products that convert sunlight into electricity.

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Canadian Solar Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $43.9 million ($1.02 per diluted share) in the quarter. Canadian Solar Inc. had a net income of $20.3 million or 47 cents per share in the year earlier quarter.

Revenue: Rose 32.5% to $499.6 million from the year earlier quarter.

Actual vs. Wall St. Expectations: CSIQ fell short of the mean analyst estimate of a loss of 51 cents per share. Analysts were expecting revenue of $496.9 million.

Quoting Management: Dr. Shawn Qu , Chairman and Chief Executive Officer of Canadian Solar, remarked: “This was another challenging quarter as the solar industry continues to navigate pricing pressures, financing restrictions and fluctuating subsidies. I am proud that Canadian Solar’s team remained focused despite the potential distractions. We met our shipment guidance for the quarter, reduced inventory levels and further improved our balance sheet. Customers continue to partner with Canadian Solar because of our global brand, strong track record of execution, the proven high-quality and performance of our modules, and our dedicated service. Based on our results, we believe that Canadian Solar is benefiting from the flight to quality and continues to gain market share.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 53.1%, with the biggest boost coming in the fourth quarter of the last fiscal year when revenue rose 78.1% from the year earlier quarter.

Gross margin shrank 14.9 percentage points to 2.4%. The contraction appeared to be driven by increased costs, which rose 56.4% from the year earlier quarter while revenue rose 32.5%.

The company’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $7.1 million in the second quarter, a profit of $5.9 million in the first quarter and $25.5 million in the fourth of the last fiscal year.

The company has now fallen short of estimates in the last two quarters. In the second quarter, it missed expectations by 5 cents with net income of 24 cents versus a mean estimate of net income of 29 cents per share.

Looking Forward: Expectations for the company’s performance in the upcoming quarter are lower than they were ninety days ago. Over the past three months, the average estimate for the fourth quarter has fallen from a profit of 33 cents per share to a loss of 16 cents. For the fiscal year, the average estimate has moved down from a profit of 72 cents a share to a loss of 42 cents over the last ninety days.

Competitors to Watch: First Solar, Inc. (NASDAQ:FSLR), Trina Solar Limited (NYSE:TSL), SunPower Corporation (NASDAQ:SPWRA), JA Solar Hldgs. Co., Ltd. (NASDAQ:JASO), China Sunergy Co., Ltd. (NASDAQ:CSUN), Suntech Power Hldgs. Co., Ltd. (NYSE:STP), Hanwha Solarone Co Ltd (HSOL), Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE), LDK Solar Co., Ltd (NYSE:LDK), and Evergreen Solar, Inc. (NASDAQ:ESLR).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)