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Canadian Solar (CSIQ) Up 13.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Canadian Solar (CSIQ - Free Report) . Shares have added about 13.3% 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 Q2 Earnings & Sales Lag Estimates

Canadian Solar reported second-quarter 2018 earnings of 26 cents per share, missing the Zacks Consensus Estimate of 33 cents by 21.2%. The company reported earnings of 63 cents per share in the year-ago quarter.

Total Revenues

Solar cell manufacturer Canadian Solar posted total revenues of $650.6 million in the quarter, which also missed the Zacks Consensus Estimate of $715 million by 9%. Further, the top line was down 6% from $692.3 million reported in second-quarter 2017.

Operational Update

Solar module shipments in the quarter totaled 1,700 megawatts (MW), up 23.7% from the first quarter’s shipment of 1,374 MW. The figure however exceeded management’s guided range of 1.50-1.60 gigawatt (GW).

Gross profit was $159.4 million, down 5% from the year-ago level of $167.8 million. Gross margin was 24.5% in the quarter (excluding the AD/CVD reversal benefits) compared with 24.2% in the prior-year quarter.

Total operating expenses were $105.5 million, up 25.5% year over year. Selling expenses totaled $40.3 million, up 2.4% year over year. General and administrative expenses were $56.4 million, up 6.6% year over year. Research and development expenses were $9.1 million compared with $7.3 million a year ago.

Interest expenses were $26.6 million, marginally down from $26.7 million recorded a year ago.

Financial Update

As of Jun 30, 2018, cash and cash equivalents were $452.5 million, down from $561.7 million as of Dec 31, 2017.

Long-term debt as of Jun 30, 2018 was $221.3 million, down from $404.3 million as of Dec 31, 2017.

Business Developments

During the reported quarter, the company’s wholly-owned subsidiary, Recurrent Energy closed on debt financing and tax equity investment commitments for its 102 megawatt-peak (MWp) NC 102 solar power project, located in North Carolina. Prudential Capital Group will provide a $106.7 million debt facility for the project including a tax equity bridge loan, term loan and revolving loan.

Moreover, it announced the COD of its 56.3 MWp Yamaguchi Shin Mine solar power project in Japan.

Guidance

For third-quarter 2018, Canadian Solar expects shipments in the range of 1.50-1.60 GW including approximately 210 MW of shipments to the company's utility-scale solar power projects. Total revenues are projected in the range of $790-$840 million along with gross margin in the 20-23% range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 20.26% due to these changes.

VGM Scores

At this time, Canadian Solar has a nice Growth Score of B, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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




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