Canadian Solar Inc. (NASDAQ:CSIQ) Shares Shine Bright Despite Earnings Drop


Canadian Solar Inc. (NASDAQ:CSIQ) share prices advanced 12.42% to $17.38 and an additional 0.58% in after-hours trading even after the company printed lower earnings.

Canadian Solar Inc. (NASDAQ:CSIQ) reported earnings of $22.58 million or $0.39 per share, significantly lower than the $61.33 million or $1.04 per share in the same quarter a year ago. This represents a 63.2% year-over-year decline. However, the latest quarter’s earnings still beat market expectations at $0.14 per share. Q1 revenue came in at $721.42 million, 16.2% lower compared to last year’s $860.89 million for the same period.

As its name suggests, Canadian Solar is a provider of solar power products, services and system solutions with operations in North America, South America, Europe, Africa, the Middle East, Australia and Asia. Its operations comprise the module segment, energy development segment and electricity generation segment and it designs, develops and manufactures solar wafers, solar cells and solar power products.

For these solar companies, market watchers typically pay closer attention to gross margins. For Canadian Solar Inc. (NASDAQ:CSIQ), its gross margin came in at 15.6% compared to 12-14% guidance, which is a positive sign. In addition, management raised full-year revenue guidance by $100 million to $3.0 billion to $3.2 billion, on top of a potential $200 million to $400 million impact from project sales.

Keep in mind, however, that the company has yet to pay around $2.2 million in debt. This means that Canadian Solar Inc. (NASDAQ:CSIQ) has to find more high-margin projects to complete within the year and work on its 1,185 MW out of 1,263 MW of backlog in the US. In this solar power industry, there is constant volatility in prices, as a faster pace of growing capacity could translate to slower revenue growth.

In addition, while demand for solar panels continues to grow from the commercial and residential fronts, companies have to deal with contracts designed to beat a reduction in the solar investment tax credit at the end of 2016.


DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.