Canadian Solar Inc. (CSIQ) reported an adjusted EPS of 58 cents in the fourth quarter of fiscal 2010, falling short of the Zacks Consensus Estimate of 65 cents. The downside came from higher raw material costs, lower selling prices and slower production rates during Chinese holidays. The company’s results however surpassed the year-ago quarterly earnings of 35 cents.
Fiscal 2010 adjusted EPS came in at $1.15 lower than both the Zacks Consensus Estimate of $1.22 and fiscal 2009 adjusted EPS of $1.40.
Operational Performance
Canadian Solar had revenues of $452.7 million, beating the Zacks Consensus Estimate of $418 million. Revenues were also greater than $377.2 million in the third quarter of 2010 and $254.2 million in the fourth quarter of 2009.
Shipments in the reported quarter rose to 237 MW, compared to shipments of 200 MW for the third quarter of 2010 and shipments of 141 MW in the year-ago quarter.
Canadian Solar’s upside in quarterly sales came from its global markets with Europe continuing to be its largest contributor. Revenues from the European market in the reported quarter accounted for 70.9% of total sales, down from 91.8% in the year-ago quarter.
However in real terms, revenues from the European market increased to $321.1 million from $233.3 million in the year-ago quarter. Canadian Solar has significantly increased its sales to the Asia Pacific region and America as part of its market diversification strategy.
The company generated $46.8 million in revenues from the Americas in the reported quarter compared to $5.3 million last year. Asia and others accounted for $84.8 million of revenues, compared to $15.6 million last year.
In the reported quarter operating expenses were $34.9 million, compared to $25.3 million in third quarter of 2010 and $39.7 million in the year-ago quarter. The sequential increase in operating expenses is primarily due to write-off of prepayments to a supplier of $9.7 million.
Overall net income for the reported quarter was $25.5 million compared with net income for the third quarter of 2010 of $20.3 million and a net loss of $15.6 million in the year ago period.
Fiscal 2010 revenue came in at $1.5 billion versus the Zacks Consensus Estimate of $1.4 billion and fiscal 2009 revenue of $631 million. Fiscal 2010, net income was $50.6 million compared to $22.6 million for fiscal year 2009.
Financial Condition
Canadian Solar reported cash and cash equivalents of $288.7 million at the end fiscal 2010, up from $160.1 million at fiscal-end 2009. Long term borrowings increased to $99.5 million from $29.3 million at fiscal-end 2009.
Outlook
Canadian Solar is a vertically-integrated manufacturer of silicon ingots, wafers, cells, solar modules and custom-designed solar power applications. The company sells its products to customers worldwide, spread across Germany, Spain, the U.S., France, the Czech Republic, Italy, South Korea, Canada and China.
Canadian Solar offers one of the broadest crystalline silicon solar module product lines in the industry, ranging from modules made of medium power, low-cost upgraded metallurgical-grade silicon, to high efficiency, high power output mono-crystalline modules, along with a range of specialty products.
Canadian Solar’s standard solar modules are sold to distributors and system integrators, and specialty solar modules and products to various manufacturers, who integrate these solar modules into their own products or sell and market them as part of their own product portfolio.
Canadian Solar’s China-based manufacturing assets have a distinct cost advantage over its peers. The company also pursues a balanced and diversified supply channel mix by entering into long-term supply contracts and toll manufacturing arrangements.
In addition to in-house solar cell, wafer and ingot manufacturing, it is also ramping up its internal solar cell capacity to cut back its reliance on third party solar cells for the manufacture of solar modules.
Looking forward, Canadian Solar in the first quarter of 2011 expects shipments to be in-line with the fourth quarter of 2010. For fiscal 2011, the company reiterated its previous guidance range of shipments of 1,200 MW–1,300 MW.
However, in the near-term its shipments were curtailed by higher solar cell prices in the market, which was eating into its margins. The company is addressing this by ramping up its captive solar cell capacity. However, it will take some time until the company becomes self-sufficient for its solar cells requirements.
Canadian Solar currently is trading at a premium compared to its peers in terms of forward earnings estimates. Thus in the near term, we believe its Zacks #1 Rank (Strong Buy) peers like JinkoSolar Holding Company (JKS), and LDK Solar Company Ltd. (LDK) offer more promise compared to the Zacks #4 Rank (Sell) Canadian Solar stock.
CANADIAN SOLAR (CSIQ): Free Stock Analysis Report
JINKOSOLAR HLDG (JKS): Free Stock Analysis Report
LDK SOLAR CO (LDK): Free Stock Analysis Report
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