Why Is Canadian Solar (CSIQ) Down 3.3% Since Its Last Earnings Report?

It has been about a month since the last earnings report for Canadian Solar Inc. CSIQ. Shares have lost about 3.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is CSIQ due for a breakout? 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 Q4 Earnings & Sales Miss Estimates

Canadian Solar reported fourth-quarter 2017 earnings of $1.01 per share, missing the Zacks Consensus Estimate of $1.03 by 2%. The company had reported a loss of 23 cents per share in the year-ago period.

Total Revenues

Solar cell manufacturer, Canadian Solar posted total revenues of $1.1 billion in the quarter, which also missed the Zacks Consensus Estimate of $1.5 billion by 24.8%. The top line was however up a solid 65.9% from $668.4 million reported in fourth-quarter 2016.

Operational Update

Solar module shipments in the quarter totaled 1,831 megawatts (MW), up 13.6%, from the year-ago level of 1,612 MW. The figure exceeded management’s guidance range of 1,720-1,820 MW.

Gross profit was $218.6 million, up 346.1%, from the year-ago level of $49 million. Gross margin was 19.7% in the quarter compared with 7.3% in the prior-year quarter.

Total operating expenses were $88.4 million, up 45.6% year over year. Selling expenses totaled $39.9 million, down 6.6% year over year. General and administrative expenses were $69.7 million, up 10.8% year over year. Research and development expenses were $8.6 million compared with $3.2 million a year ago.

Interest expenses were $33.5 million, up from $22.9 million recorded a year ago.

Financial Update

As of Dec 31, 2017, cash and cash equivalents were $561.7 million, up from $511 million as of Dec 31, 2016.

Long-term debt as of Dec 31, 2017, was $404.3 million, down from $493.5 million as of Dec 31, 2016.

Guidance

For first-quarter 2018, Canadian Solar expects shipments in the range of 1.30-1.35 gigawatts (GW). Total revenues are projected in the range of $1.37-$1.40 billion along with gross margin in the 10-12% range.

Canadian Solar’s total module shipments in 2018 are anticipated to be in the range of 6.6-7.1 GW. Total revenues are expected to be in the range of $4.4-$4.6 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter.

Canadian Solar Inc. Price and Consensus

 

Canadian Solar Inc. Price and Consensus | Canadian Solar Inc. Quote

VGM Scores

At this time, CSIQ has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for growth and to a lesser degree momentum.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, CSIQ has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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