Canadian Solar Beats Estimates, Taking Out Forex Hit

May.12.11 | About: Canadian Solar (CSIQ)

Canadian Solar (NASDAQ:CSIQ) posted earnings results last night that were ahead of analyst estimates on the revenue side ($443 million vs $423 million) as well as the EPS side using the non-GAAP number and excluding the forex hit (0.44/share vs expectation for 0.41). Gross margins improved 2% over the year-ago quarter (although it dropped a few percent sequentially) while shipments increased 32%.

It should also be noted that the company continues to decrease exposure to the European market, where it has been (and still is) overly concentrated. Last year, nearly 89% of revenues came from Europe; that has dropped to 76% in the latest quarter.

Here are highlights from comments made by the CEO and CFO:

  • The Canadian solar market continues to be encouraging, with sales volumes expected to double this year.
  • Demand in Japan will return.
  • The company continues to expand in the US and Germany.
  • Improving efficiencies were offset by rises in raw material costs.
  • CSIQ expects to bring internal capacity to 1.9GW by next year and add another 600MW through a joint venture.
  • Raw material costs are coming down this quarter.

Looking ahead, the company expects shipments for this quarter to come in the range of 245-255MW with gross margins about where they were for Q1. The company noted that 100MW of module shipments won’t be recognized as revenue until Q3 due to cash on delivery contract terms. It may be able to offset that by recognizing partial revenues for three EPC projects in Ontario. For the full year, CSIQ is reiterating its guidance of 1.2-1.3GW.

Technically, shares of CSIQ remain mighty weak. In my opinion, shares likely need to test the 2010 lows around the $9 level (it's at $9.80 now) before a bottom can be found.