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Canadian Solar (CSIQ) Q1 Earnings: What's in the Offing?

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Canadian Solar Inc. (CSIQ - Free Report) is set to report first-quarter 2018 results on May 16, before the market opens.

In the last reported quarter, the company posted a positive earnings surprise of 21.69%. However, the bottom line missed the Zacks Consensus Estimate in one of the last four quarters, with an average negative surprise of 218.02%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors at Play

During the first quarter, Canadian Solar completed the sale of a number of solar power projects. These include the sale of its interest in three solar power plants, totaling 309 MW to Korea Electric Power Corporation for $720 million and divesting its portfolio of 142 Megawatt-peak for $267.7 million. The company also completed the sale of 28 MW of Gaskell West one solar power plant and two solar power plants totaling 2.6 MW to Canadian Solar Infrastructure Fund. 

We expect contributions from these project sales to drive the company’s top line in the yet-to-be reported quarter. The Zacks Consensus Estimate for the Canadian Solar’s first-quarter revenues, pegged at $1.38 billion, reflects an annual growth of 104.4%. Moreover, consensus estimate for revenues also remains within the company’s first-quarter guidance range of $1.37-$1.40 billion.

Such solid revenue upside is anticipated to eventually fuel the company’s bottom line. In line with this, the Zacks Consensus Estimate for first-quarter earnings of 38 cents per share reflects a massive year-over-year improvement of 480%.

However, Canadian Solar expects to face volatility in certain key markets such as the United States and India due to implementation of trade protectionism in these nations. Moreover, at the outset of 2018, the company witnessed a slowdown in solar module demand, owing to several stringent trade policies. Also, during winters demand for these products remains low. Further, for the past couple of months, a decline in polysilicon price has been observed, which in turn is expected to lead to lower value for Canadian Solar’s projects. These headwinds are expected to weigh on the company’s gross margin growth in the first quarter.

 

Canadian Solar Inc. Price and EPS Surprise

 

Canadian Solar Inc. Price and EPS Surprise | Canadian Solar Inc. Quote

 

Earnings Whispers

Our proven model does not show that Canadian Solar’s earnings will beat estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is not the case here, as you will see below.

Zacks ESP: Canadian Solar has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 38 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Canadian Solar’s Zacks Rank #3 increases the predictive power of ESP. However, the company’s Earnings ESP of 0.00% makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Recent Solar Releases

SunPower Corp. (SPWR - Free Report) incurred first-quarter 2018 adjusted loss of 20 cents per share, which was narrower than the Zacks Consensus Estimate loss of 34 cents.

First Solar (FSLR - Free Report) reported first-quarter 2018 earnings of 78 cents per share, surpassing the Zacks Consensus Estimate of a loss of 5 cents.

Enphase Energy (ENPH - Free Report) reported first-quarter 2018 loss of a penny, which was narrower than the Zacks Consensus Estimate of a loss of 3 cents.

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