Canadian Solar gains on upbeat Q2 revenue outlook

Canadian Solar (CSIQ) reported its first-quarter earnings early on Thursday, before the opening bell. The bottom line slipped to a loss from a profit last year, which had a higher revenue contribution from project sales and higher solar module average selling price. The bottom line was narrower than the analysts’ expectations while the top line exceeded consensus estimates. However, the company guided second-quarter revenue above Street’s view.

Net revenue plunged by 66% to $484.72 million, primarily due to the higher revenue contribution from project sales and higher solar module average selling price in the prior period. This was better than the company’s guidance range of $450 million to $480 million. Total solar module shipments were 1,575 MW, better than the guidance range of 1.3 GW to 1.4 GW.

Net loss attributable to the company was $17.2 million or $0.29 per share, compared to a profit of $43.38 million or $0.72 per share in the previous year quarter. The results were impacted by higher costs and expenses.

The overall profitability was impacted by a foreign exchange loss due to the appreciation of the RMB against the US dollar, lost manufacturing days and a lower production volume due to its ERP system upgrade and the Chinese New Year holiday, as well as anticipated lower sales of solar power projects.

Looking ahead, the company expects that its profitability will improve as moving through 2019. For the second quarter of 2019, total solar module shipments to be in the range of approximately 1.95 GW to 2.05 GW. Total revenue for the second quarter of 2019 is anticipated to be in the range of $970 million to $1.01 billion.

Gross margin for the second quarter is predicted to be between 13% and 15%, reflecting the inclusion of the Mustang project sale, which has a lower gross margin based on the enterprise value of the project, not equity. Excluding the Mustang project sale, gross margin for the second quarter is projected to be between 16% and 18%.

Also read: Canadian Solar Q4 earnings results

The company said it reasonably expected a healthy pause in the first quarter of 2019 due to the acceleration of certain high-profit project sales from 2019 into 2018, the appreciation of the RMB, lost manufacturing days related to its ERP system upgrade and the impact of Chinese New Year on production and sales volumes.

Canadian Solar is encouraged by the healthy demand levels that it is seeing in its key markets, stability in module average selling prices and expected higher utilization of its capacity. The company’s late-stage, utility-scale solar power project pipeline, including those under construction, increased to about 3.4 GWp, as of April 30, 2019. The sale of the majority of these projects remains on track for 2020 or later.

The company agreed in April to sell 80% interest in its 482.6 MWp late-stage project portfolio in Brazil and expects to close this transaction and recognizes the revenue after the second quarter of 2019. In addition, in May, Canadian Solar closed the sale of the 134 MWp Mustang project in the US and the 68 MWp Aguascalientes project in Mexico.

Shares of Canadian Solar ended Wednesday’s regular session down 0.45% at $17.69 on the Nasdaq. Following the earnings release, the stock inched up over 3% in the pre-market session.

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