Canadian Solar (CSIQ) Q4 Earnings Miss Estimates, Rise Y/Y

Solar cell manufacturer Canadian Solar Inc. CSIQ reported fourth-quarter earnings of $1.28 per share, lagging the Zacks Consensus Estimate by 5.9%. However, earnings grew considerably from 50 cents per share in the year-ago quarter.

The upside was driven by an increase in shipment volumes and higher revenues.

In 2014, earnings per share of $4.11 also missed the estimates by 1.7%. Earnings were, however, much higher than 63 cents per share in 2013.

Canadian Solar posted revenues of $956.2 million in the fourth quarter, missing the Zacks Consensus Estimate by 5.2%. However, total revenues were 84.1% higher than $519.5 million reported in the prior-year quarter.

The company generates a major part of its revenues from global operations. Geographically, in the fourth quarter of 2014, sales in the American markets comprised 61.8% of net revenues; sales in the Asian market and others comprised 32.7% while sales in the European markets represented 5.5% of net revenues.

Contributions from Asia declined significantly from 62.4% in the year-ago quarter. The American markets performed remarkably well considering that it had contributed 32.1% in the prior-year period. Europe saw a decline after gaining traction in the third quarter of 2014.

2014 revenues of $2,960.6 million also missed the Zacks Consensus Estimate by 0.8%. However, revenues were up 79% year over year.

Solar module shipments in the reported quarter totaled 1,125 megawatts (“MW”), up 81.2% year over year. Shipments also exceeded the guidance range of 810 MW to 860 MW.

Gross profit in the fourth quarter was $184.9 million, 82.5% higher than the year-ago gross profit of $103.1 million.

Total operating expenses were $68.9 million in the quarter, up 23.1% year over year. Operating expenses escalated primarily due to higher general and administrative expenses.

Selling expenses totaled $36.2 million in the reported quarter, up 27.3% year over year. General and administrative expenses were $29.3 million, up 99.7% sequentially and 20.6% year over year. Research and development expenses were $3.4 million in the fourth quarter of 2014, up from $3.2 million a year ago.

In spite of rising operating expenses, Canadian Solar boosted its operating margin by 340 basis points (bps) year over year to 12.1% in the reported quarter.

Interest expenses increased 22.2% to $12.1 million from $9.9 million in the year-ago quarter on account of interest yet to be paid on convertible senior notes that were issued by the company in the first quarter of 2014.

As of Dec 31, 2014, cash and cash equivalents were $549.5 million, higher than $228.3 million as of Dec 31, 2013.

Long-term debt as of Dec 31, 2014, was $134.3 million, down from $151.4 million as of Dec 31, 2013.

At the end of Feb 2015, Canadian Solar had numerous utility-scale solar projects totaling approximately 1.4 gigawatts (“GW”) DC in its basket. These comprise both owned and joint-venture projects along with those where the company provides engineering, procurement and construction (“EPC”) services.

During the reported quarter, the company completed the sale of five solar power plants in Canada and one in the U.S.

At fourth-quarter end, Canadian Solar entered into an agreement wherein it will acquire Recurrent Energy LLC from Sharp Corp. for $265 million. The transaction is expected to close in the first quarter of 2015. The company expects to expand its utility-scale solar project pipeline by about 1.0 GW DC to 2.4 GW DC.

Canadian Solar expects shipments in the range of 1,000 MW to 1,030 MW in the first quarter of 2015. Total revenues are expected in the range of $725 million to $775 million with gross margin between 16% and 18% for the first quarter of 2015. The outlook takes into consideration project sales mix that the company expects to close in Canada and the appreciation of the U.S. dollar.

For 2015, the company expects shipments to be in the range of 4.0 GW to 4.3 GW. Further, it expects revenues to be in the range of $2.8 billion to $3.0 billion.

First Solar Inc. FSLR reported adjusted fourth-quarter 2014 earnings of $1.89 per share, comfortably beating the Zacks Consensus Estimate by 145.5%.

SunPower Corp. SPWR reported fourth-quarter 2014 adjusted earnings per share of 17 cents, lagging the Zacks Consensus Estimate by 32%.

SolarCity Corp. SCTY reported an adjusted loss of $1.33 per share in the fourth quarter of 2014, wider than the Zacks Consensus Estimate of a loss of $1.26 per share.

Canadian Solar presently holds a Zacks Rank #3 (Hold).