Canadian Solar Inc. (CSIQ) reported second quarter 2013 results with adjusted loss per share of 29 cents wider than the Zacks Consensus Estimate of a loss of 26 cents per share. However, it was narrower than the loss of 59 cents in the second quarter of 2012.
Operational Performance
In the reported quarter, Canadian Solar posted revenues of $380.3 million, missing the Zacks Consensus Estimate of $419 million. Revenues were higher than the year-ago figure of $348.2 million.
Quarterly Highlights
Total solar module shipments in the second quarter were 455 megawatt (MW), compared with 340 MW in the first quarter of 2013 and 412 MW in the second quarter of 2012. Total solar module shipments included 35 MW from the company's total solutions business, compared with 23 MW in the first quarter of 2013 and 9 MW in the second quarter of 2012.
Revenues from the European market in the reported quarter accounted for 10.6% of total sales, down from 24.7% in first quarter 2013. Also, in real terms, revenues from the European market decreased to $40.2 million from $65 million in the sequentially preceding quarter.
Revenues from America accounted for 37.8% of total sales, up from 17.9% in first quarter 2013. The company generated $143.9 million in revenues from America in the reported quarter compared with $47.1 million in first quarter of 2013.
Asia and others accounted for $196.3 million of revenues, compared with $151.5 million in the first quarter of 2013. This represents 51.6% of total sales versus 57.4% in first quarter of 2013.
Solar module shipments to Japan were up 95% sequentially and represented 35.7% of total solar module shipments.
Gross profit in the second quarter of 2013 was $48.7 million, compared with $25.6 million in the first quarter of 2013 and $43.2 million in the year-ago period. The sequential increase was driven by higher shipment volume and increased revenue contribution from the company's higher-margin total solutions business. The year-over-year upside also came from higher revenues from the total solutions business as well as lower manufacturing costs. This was, however, partially offset by a decline in average selling price during the period.
Total operating expenses were $36.4 million, compared with $7.5 million in the first quarter of 2013 and $46.2 million in the second quarter of 2012.
Selling expenses were $20 million, up 6.4% from $18.8 million in the first quarter 2013 but down 18% from $24.4 million in the second quarter of 2012.
Research and development expenses were $3.0 million, up 25% from $2.4 million in the first quarter of 2013 but down 14.3% from $3.5 million in the second quarter of 2012.
Financial Condition
Canadian Solar reported cash, cash equivalents and restricted cash of $540.6 million at the end of the reported period, down from $606.1 million as of Mar 31, 2013. Long-term debt was $254.6 million compared with $205.3 million as of Mar 31, 2013.
Guidance
For the third quarter of 2013, the company expects photovoltaic module shipments in the range of approximately 410 MW to 430 MW, with gross margin expected to be between 10% and 12%.
For the full year 2013, the company expects photovoltaic module shipments in the range of approximately 1.6 gigawatt (GW) to 1.8 GW.
At the Peers
SunPower Corp.’s (SPWR) second quarter 2013 adjusted earnings per share of 48 cents comfortably surpassed the Zacks Consensus Estimate of 11 cents as well as the year-ago profit level of 8 cents.
First Solar Inc. (FSLR) reported adjusted second quarter 2013 earnings of 39 cents per share, well below the Zacks Consensus Estimate of 50 cents by 22% and 43.5% from the preceding quarter. The company’s reported number also saw a 74.3% decline from the year-ago period.
Our Take
Canadian Solar Inc. is one of the world's largest solar companies. The company is progressing both on its owned utility-scale solar projects as well as other solar projects, where it acts as an Engineering, Procurement and Construction contractor. Also, the company caters to a geographically-diverse customer base spread across its key markets in Germany, Spain and the U.S., as well as emerging market opportunities in France, the Czech Republic, Italy, South Korea, Canada, Japan and China.
Given the industry-wide high inventory level, we do not foresee any short-term improvement in margins for the company. The company presently retains a short-term Zacks Rank #3 (Hold). In the near term, we would advise investors to accumulate its short-term Zacks Rank #2 (Buy) peer ReneSola Ltd. (SOL).
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