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A month has gone by since the last earnings report for Canadian Solar (CSIQ). Shares have added about 21.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Canadian Solar Q3 Earnings & Revenues Beat Estimates
Canadian Solar reported third-quarter 2020 earnings of 15 cents per share in contrast to the Zacks Consensus Estimate of a loss of 4 cents. However, the reported earnings figure deteriorated 84.4% from the year-ago quarter’s earnings of 96 cents per share.
The year-over-year deterioration can be attributed to higher cost of revenues that the company incurred in the reported quarter.
Canadian Solar’s total revenues of $914.4 million outpaced the Zacks Consensus Estimate of $861 million by 6.3%. Net revenues in the reported quarter also comfortably exceeded the company’s guidance of $840-$860 million.
Moreover, the top line improved 20.3% from $759.9 million reported in third-quarter 2019. The year-over-year improvement is driven by higher module shipments and project sales.
Solar module shipments in the quarter totaled 3,169 megawatts (MW), up 33% on a year over year basis and grew 9% from 2,905 MW in the second quarter of 2020. Growth in shipments was driven by strong global demand growth. Shipments also exceeded the guidance range of 2.9-3.1 MW.
Gross profit amounted to $178.4 million, down 12.3% from the year-ago quarter’s $198.9 million. Gross margin was 19.5% in the quarter, indicating a contraction of 670 basis points from the third quarter of 2019. However, it came above the guidance range of 14-16%.
Total operating expenses were $119 million, up 0.5% year over year. Selling expenses totaled $54 million, up 15% year over year. General and administrative expenses were $56.2 million, down 8.6% year over year. Research and development expenses were $14.1 million, up 22.3% from the year-ago period.
Income tax expenses in the third quarter of 2020 were $24 million compared with $10 million in the third quarter of 2019.
Interest expenses were $17.9 million, down from $19.2 million recorded in the year-ago period.
As of Sep 30, 2020, cash and cash equivalents totaled $1,103 million, up from $668.8 million as of Dec 31, 2019.
Long-term debt as of Sep 30, 2020 was $623.6 million, up from $619.5 million as of Dec 31, 2019.
For fourth-quarter 2020, Canadian Solar expects shipments of 2.9-3.0 GW. This guidance includes approximately 350 MW of shipments to its utility-scale solar power projects that may not be recognized as revenues. Total revenues are projected within $980-$1,015 million, while gross margin is expected in the band of 8-10%.
The Zacks Consensus Estimate for the company’s third-quarter revenues is pegged at $1,140 million, higher than the guided range.
For 2020, Canadian Solar now expects total module shipments in the range of 11.2-11.3 GW, compared with the prior guidance of 11-12 GW.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -179.33% due to these changes.
Currently, Canadian Solar has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Canadian Solar has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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