Solar cell manufacturer
Canadian Solar Inc.
) share price rallied yesterday by more than 24% following its
second quarter 2014 results. The company reported earnings of 95
cents per share, reversing its year-ago loss of 29 cents per share
and beating the Zacks Consensus Estimate of earnings of 58 cents.
The reported number was also considerably above 7 cents per share
earned in the sequentially preceding quarter.
The upside was driven by an increase in shipment volume and higher
Canadian Solar posted revenues of $623.8 million in the second
quarter, beating the Zacks Consensus Estimate of $575 million by
8.5%. Total revenues were almost 64% higher than $380.4 million
reported in the prior-year quarter.
Canadian Solar generates a major part of its revenues from global
operations. Geographically, in the second quarter of 2014, sales to
the Americas comprised 55.5% of net revenues; sales to Asia and
others comprised 29.8% while sales to the European markets
represented 14.7% of net revenues.
The contribution from Asia declined significantly from the
prior-year quarter as well as sequentially, while the American
markets performed remarkably well over that period. Again, Europe
is slowly gaining traction, increasing both year over year as well
Solar module shipments in the reported quarter totaled 646
megawatts (MW), up 42% year over year and 29.2% sequentially.
Gross profit in the second quarter was $118.2 million, much higher
than the year-ago gross profit of $48.7 million and $68.6 million
in the preceding quarter. The increase in gross profit was
primarily due to more revenues coming in from the company's
higher-margin total solutions business, lower module manufacturing
cost, higher module average selling price (ASP) as well as higher
Total operating expenses were $50.5 million in the quarter, up
38.7% year over year and 20.2% sequentially.
Although operating expenses saw an upward spike, Canadian Solar
boosted its operating margin considerably by 770 basis points (bps)
year over year and 520 bps sequentially.
Research and development (R&D) expenses were $2.9 million in
the second quarter of 2014, down from $3.0 million a year ago but
up from $2.5 million in the last reported quarter.
As of Jun 30, 2014, cash and cash equivalents were $341.3 million,
higher than $228.3 million as of Dec 31, 2013.
Net cash used in operating activities was $44.3 million, compared
to $153.7 million in the first quarter of 2014.
Long-term debt as of Jun 30, 2014, was $150.1 million, down from
$151.4 million as of Dec 31, 2013.
At the end of Jun 2014, Canadian Solar had in its basket numerous
utility-scale solar projects totaling approximately 1.3 gigawatt
(GW) DC. These projects comprise owned and joint-venture projects
along with projects where the company provides engineering,
procurement, and construction (EPC) services.
Recently, the company announced that it executed a 44-MW module
sales agreement with affiliates of Entropy Investment Management
and Entropy Solar Integrators, which will construct seven solar
farms in North Carolina this year.
The U.S. as well as Europe has imposed tariffs on China-made solar
products. Moreover, in July, the U.S. has also extended its duties
that cover solar products manufactured in Taiwan. Hence, near-term
instability resulting from trade disputes and policy uncertainty
will likely hurt Canadian Solar in the months ahead. We note that
most of the company's manufacturing facilities are in China.
Canadian Solar expects shipments in the range of 720 MW to 750 MW
in the third quarter of 2014. Total revenues are expected in the
range of $760 million to $800 million with gross margin between 19%
ReneSola Ltd. (
) reported earnings per American Depositary Share (ADS) of 1 cent
in the second quarter of 2014, reversing the year-ago loss of 24
cents per ADS. The Zacks Consensus Estimate was a loss of 15 cents
per ADS. The upside was driven by lower operating expenses and
The company presently holds a Zacks Rank #3 (Hold). Other stocks to
look out for in the space are JinkoSolar Holding Co. Ltd. (
) and Enphase Energy, Inc. (
). JinkoSolar sports a Zacks Rank #1 (Strong Buy) while Enphase
Energy carries a Zacks Rank #2 (Buy).
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