A month has gone by since the last earnings report for Canadian Solar (CSIQ). Shares have added about 9.4% 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 its most recent earnings report in order to get a better handle on the important drivers.
Canadian Solar Q3 Earnings Top Estimates, Revenues Lag
In the reported quarter, total revenues of this solar cell manufacturer came in at $768 million, which missed the Zacks Consensus Estimate of $806.1 million by 4.7%. Further, the top line declined 15.8% from $912.2 million reported in third-quarter 2017.
Solar module shipments in the quarter totaled 1,590 megawatts (MW), down 6.5% from the second quarter's shipment of 1,700 MW. The figure came within management's guided range of 1.50-1.60 gigawatt (GW).
Gross profit was $200.4 million, up 25.4% from the year-ago level of $159.8 million. Gross margin was 25% in the quarter (excluding the CVD reversal benefits). Including the benefits, gross margin was 26.1% compared with 17.5% in the third quarter of 2017.
Total operating expenses amounted to $104.5 million, up 2.4% year over year. Selling expenses totaled $38.4 million, down 10.3% year over year. General and administrative expenses were $59 million, up 10.4% year over year. Research and development expenses summed $10.1 million compared with $7.3 million a year ago.
Interest expenses were $26.8 million, down from $33.7 million recorded a year ago.
As of Sep 30, 2018, cash and cash equivalents grossed $519.6 million, down from $561.7 million as of Dec 31, 2017.
Long-term debt as of Sep 30, 2018 was $120.2 million, significantly down from $404.3 million as of Dec 31, 2017.
During the reported quarter, Canadian Solar's won a contract to supply 164 MW of photovoltaic modules to the 350 MWp Escatrón Solar power project owned by COBRA Group - a subsidiary of ACS Group in Spain. It also secured a Victorian government support agreement for its greenfield 100MWac Carwarp Solar Project in Australia.
Moreover, Canadian Solar entered into a joint venture with ET Energy - a global clean energy developer and operator - to jointly provide EPC services for two solar power projects totaling 132 MWp in South Africa for BioTherm Energy.
For fourth-quarter 2018, Canadian Solar expects shipments in the range of 1.67-1.72 GW, including approximately 170 MW of shipments to the company's utility-scale solar power projects. Total revenues are projected in the band of $690-$800 million along with gross margin of 24-26%.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 73.08% due to these changes.
Currently, Canadian Solar has a nice Growth Score of B, a grade with the same score on the momentum front. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Canadian Solar has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.