Canadian Solar Beats Guidance, Predicts Mammoth Q4, Misses Estimates, Shares Drop 12%

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One of the world’s largest solar manufacturers, Canadian Solar, published its third quarter financial results reporting solar shipments and net revenue well above the company’s own guidance, but net income was well down on estimates causing the company’s shares to drop 12%.

On the surface, Canadian Solar’s third quarter looked like a hit. The company reported solar module shipments of 1,870 MW (megawatt) compared to 1,745 MW shipped in the second quarter of 2017, 1,185 MW shipped year-over-year, and third quarter guidance in the range of 1,650 MW to 1,700 MW. Similarly, the company’s net revenue for the third quarter was an impressive $912.2 million, compared to $692.4 million taken in during the second quarter, $657.3 million year-over-year, and the third quarter guidance in the range of $805 million to $825 million.

“This was a good quarter for us, as solar module shipments, revenue and gross margin all exceeded guidance mainly due to the better-than-expected demand in China, and the pull-in effects in the US market ahead of the Section 201 ruling,” said Dr. Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar.

Further, the company is expecting to record a mammoth fourth quarter revenue, thanks to solar module sales and several expected sales of utility-scale solar energy projects. Specifically, while solar module shipments for the fourth quarter are expected to be in the normal range of between 1,650 MW to 1,750 MW, the company is expecting total revenue for the fourth quarter alone to be in the range of $1.77 billion to $1.81 billion, an impressive 94% increase over the third quarter.

“Looking into Q4 of 2017 and next year, the solar industry continues to face both opportunities and challenges,” explained Dr. Qu. “We believe that solar energy will be adopted by more and more people and the long-term aspect of the industry is bright given the compelling fundamentals. However, the environmental and trade policies of certain countries will likely continue to cause uncertainty.”

However, none of this was enough to cover the fact that the company’s net income was only $13.3 million, or $0.22 per diluted share — compared to $38.2 million, or $0.63 per diluted share, in the second quarter of 2017, $15.6 million, or $0.27 per diluted share, in the third quarter of 2016, and missing out on analyst expectations by $0.04, something that Travis Hoium over at The Motley Fool simply said “shouldn’t happen given the huge revenue beat.” As a result, the company’s shares dropped by around 11% in Thursday’s trading.

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Joshua S Hill

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