Published on November 16th, 2018 | by Joshua S Hill0
Canadian Solar Reports Middling Third Quarter But Lowers Full-Year Guidance
November 16th, 2018 by Joshua S Hill
Canadian Solar, one of the world’s largest solar power companies, announced its third-quarter financial results on Thursday, revealing middling performance which saw the company beat earnings expectations but miss its guidance on revenue, forcing it to lower its full-year 2018 revenue guidance for the second time this year.
Despite what could comfortably be called a middling third quarter, investors were nevertheless impressed enough with Canadian Solar’s performance to boost its share price 10% (as of time of writing) on the back of the company’s published results. Canadian Solar reported net revenue for the third quarter of $768 million, up 18% on the previous quarter but falling out the bottom of its third-quarter guidance range of $790 million to $840 million. This also represented a year-over-year drop of 16% on the $912.2 million recorded in the third quarter of 2017.
Gross margin was 26.1% for the third quarter, compared to 24.5% in the previous quarter and exceeding the company’s guidance, while net income was $66.5 million, or $1.09 per share, compared to $15.6 million and $0.26 per share in the second quarter — although Seeking Alpha notes that the third quarter’s earnings per share “may not be comparable” to the market consensus of $0.40, and thus presumably not comparable to previous quarters, either.
Total module shipments for the third quarter amounted to 1,590 megawatts (MW), down on the 1,700 MW reported in the second quarter and down further on the 1,870 MW reported in the same quarter a year earlier. However, third quarter shipments were towards the high end of the company’s own guidance, which set shipments in the range of 1,500 MW to 1,600 MW. Total module shipments for the quarter included 180 MW shipped to the company’s own solar projects, meaning that shipments recognized in revenue for the third quarter amounted to 1,521 MW.
“The third quarter was one of our most profitable quarters with net income of $1.09 per diluted share and a 26.1% gross margin,” said Dr Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar. “Our results underscore the strength of Canadian Solar’s module and system solutions business and global energy business, and our team’s continued execution. Revenue was slightly lower than expected in the third quarter, while gross margin was higher than expected, as certain project sales with lower gross margins were deferred to later quarters.
“As of October 31, 2018, our late-stage, utility-scale solar project pipeline reached approximately 2.9 GWp, and our portfolio of solar power projects in operation was about 1.1 GWp, with a resale value of $1.23 billion.”
Looking forward, Canadian Solar provided fourth quarter guidance for shipments to be in the range of 1.67 GW to 1.72 GW, including around 170 MW for the company’s own projects. Total revenue for the fourth quarter is expected to be in the range of $690 million to $800 million, which forced Canadian Solar to again revise down its full-year revenue guidance to be in the range of $3.53 billion to $3.64 billion.
The company remains cautious beyond 2018, as well, promising continued fluctuation due to demand levels in the company’s key markets, leading to uncertainty in 2019. “As such, we remain cautious in expanding capacity,” explained Dr Shawn Qu. “But we believe that the longer-term prospect for solar energy is bright and, to differentiate, Canadian Solar will take the challenge of industry volatility as an opportunity to ramp up the volume for unconventional innovative products, such as bifacial, that command price premiums.“
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