Canadian Solar Thrives on Good Fundamentals
On March 31, 2014, we issued an updated research report on Canadian Solar Inc. (CSIQ). One of the world's largest solar power companies, Canadian Solar, swung into profit in 2013 as against the loss incurred in 2012, buoyed by an increase in shipment volume and higher revenues. Canadian Solar’s fourth quarter 2013 revenues beat the Zacks Consensus Estimate by 1.7% and were a whopping 76.2% higher than the year-ago number.
With rapid uptake of renewable energy and increasing awareness among the masses regarding its benefits, the utility providers are gradually shifting their mode of power generation to solar, wind and water from traditional methods. This bodes well for solar companies like Canadian Solar, which are continuously diversifying their customer base geographically, across the North American and European markets, as well as the emerging markets of South Korea, Japan and China.
The Asia-Pacific countries of Japan, China and India are expected to be the principal demand drivers of solar modules in the coming years. Geographically, in the fourth quarter of 2013, sales to Asia and all other markets came to 62.4% of net revenues.
Canadian Solar’s strategy to sell solar power plants rather than being confined to a photovoltaic (PV.V) module manufacturer is expected to pay off well. The adoption of the vertical integration model which involves tie-up with utility-scale solar projects will act as a key business catalyst.
This Zacks Rank #1 (Strong Buy) company increased the total late-stage solar project pipeline to approximately 1.3 gigawatt (:GW), with geographic diversification in Canada, Japan, the U.S. and China. About 50% or 675 megawatt (MW) of projects are expected to be completed in 2014, 500 MW in 2015, and 85 MW in 2016. Hence, the slew of projects will certainly lead to earnings accretion in the future.
Again, effective execution of Canadian Solar’s total solutions business led to an operating cash flow of $73.2 million and a reduction in long-term debt to $151.4 million at the end of fourth quarter 2013, from $190.5 million at the end of the sequentially preceding quarter. The company expects to earn 50% of its total revenues in 2014 from its total solution business.
Over the past 60 days, earnings estimates for 2014 have jumped from $3.52 per share to $3.66, showing a year-over-year improvement of 481.4%.
Other stocks to look out for in the space are JinkoSolar Holding Co. Ltd. (JKS), ReneSola Ltd. (SOL) and Trina Solar Ltd. (TSL). All of these stocks hold a Zacks Rank #2 (Buy).
Read the Full Research Report on TSL
Read the Full Research Report on CSIQ
Read the Full Research Report on SOL
Read the Full Research Report on JKS
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