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Why Is Canadian Solar (CSIQ) Down 3.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Canadian Solar (CSIQ - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Canadian Solar 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 Beat Estimates, Fall Y/Y

Canadian Solar reported adjusted fourth-quarter 2019 earnings of $1.04 per share, which surpassed the Zacks Consensus Estimate of 55 cents by 89.1%. The figure however declined 35.4% from the year-ago level.

Including one-time items, GAAP earnings came in at $1.12 per share in the quarter under review compared with $1.81 in fourth-quarter 2018.

For 2019, the company reported adjusted earnings of $2.19 per share, which missed the Zacks Consensus Estimate of $2.27. The full-year bottom line also declined significantly from the year-ago figure of $3.28.

Total Revenues

This solar cell manufacturer’s total revenues of $919.7 million beat the Zacks Consensus Estimate of $869 million by 5.8%. The top line also rose 2.1% from $901 million reported in fourth-quarter 2018. The top line also exceeded the guidance of $850-$880 million.  

The year-over-year improvement is attributable to solid module shipments.  
For 2019, the company reported revenues of $3.20 billion, exceeding the Zacks Consensus Estimate of $3.15 billion by a whisker. The top line however declined 14.5% from $3.74 billion reported in 2018. Nevertheless, the full-year top line exceeded the company’s guidance of $3.13-$3.16 billion.  

Operational Update

Solar module shipments in the quarter totaled 2,474 megawatts (MW), which exceeded the guided range of 2,300-2,400 MW.This included 295 MW for the company's utility-scale solar power projects

Gross margin was 23% in the quarter (excluding the benefits of U.S. anti-dumping and countervailing duty).

Total operating expenses were $118.1 million, down 12.4% year over year. The decrease in operating costs in the reported quarter was due to lower general and administrative expenses as well as research and development expenses.

Interest expenses were $19.7 million, down from $23 million recorded in the year-ago period.

Financial Update

As of Dec 31, 2019, cash and cash equivalents totaled $668.7 million, up from $444.3 million on Dec 31, 2018.

Long-term borrowings as of Dec 31,2019 were $619.5 million, up from $393.6 million on Dec 31, 2018.

Guidance

For first-quarter 2020, Canadian Solar expects shipments in the range of 2.15-2.25 GW. This guidance includes approximately 250 MW of shipments to its utility-scale solar power projects that may not be recognized as revenues in the first quarter. Total revenues are projected within $780-$810 million, while gross margin is expected in the band of 26-28%.

The Zacks Consensus Estimate for the company’s first-quarter revenues is pegged at $939 million, higher than the company guided range.

For 2020, Canadian Solar expects total module shipments in the range of 10-12 GW. Total revenues for the year are expected in the range of $3.4-$3.9 billion. The Zacks Consensus Estimate for the company’s first-quarter earnings is pegged at $3.99 billion, higher than the company guided range.

How Have Estimates Been Moving Since Then?

Estimates revision followed an upward path over the past two months. The consensus estimate has shifted -85.92% due to these changes.

VGM Scores

Currently, Canadian Solar has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

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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