Why Is Canadian Solar (CSIQ) Up 1.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Canadian Solar (CSIQ). Shares have added about 1.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Canadian Solar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Canadian Solar Q1 Earnings Top, Revenues Rise Y/Y

Canadian Solar reported first-quarter 2020 adjusted earnings of $1.40 per share, which surpassed the Zacks Consensus Estimate of $1.16 by 20.7%.

Including one-time items, GAAP earnings came in at $1.84 per share in the quarter under review against loss of 29 cents in first-quarter 2019.

Total Revenues

This solar cell manufacturer’s total revenues of $825.6 million beat the Zacks Consensus Estimate of $795 million by 3.9%. The top line also improved a solid 70.3% from $484.7 million reported in first-quarter 2019. The top line exceeded theguidance of $780-$810 million.

The year-over-year improvement is attributable to solid module shipments and project sales.

Operational Update

Solar module shipments in the quarter totaled 2,214 megawatts (MW), which exceeded the mid-point of the guided range of 2.15-2.25 gigawatts (GW).This includes 253 MW for the company's utility-scale solar power projects. Module shipments increased 40.6% on a year- over-year basis.

Gross margin was 27% in the quarter, compared with 22.2% in the year-ago quarter. The upside was driven by increased contribution of higher margin project sales.

Total operating expenses were $109.8 million, up 8.9% year over year. The increase in operating costs in the reported quarter was due to higher general and administrative expenses as well as selling expenses.
Interest expenses were $19 million, down from $21.7 million recorded in the year-ago period.

Financial Update

As of Mar 31, 2020, cash and cash equivalents totaled $618.6 million, down from $668.7 million on Dec 31, 2019.

Long-term borrowings as of Mar 31,2020 were $665.8 million, up from $619.5 million on Dec 31, 2019.

Guidance

For second-quarter 2020, Canadian Solar expects shipments in the range of 2.5-2.7 GW. This guidance includes approximately 200 MW of shipments to its utility-scale solar power projects that may not be recognized as revenues in the second quarter. Total revenues are projected within $630-$680 million, while gross margin is expected in the band of 18.5-20.5%.

The Zacks Consensus Estimate for the company’s second-quarter revenues is pegged at $794.7 million, higher than the guided range.

For 2020, Canadian Solar still expects total module shipments in the range of 10-12 GW. However, in light of the uncertainty with respect to business conditions in the second half of 2020 due to COVID-19, Canadian Solar withdrew its earlier announced 2020 annual revenue guidance.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -104.6% due to these changes.

VGM Scores

Currently, Canadian Solar has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Canadian Solar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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