A Closer Look at 3Q15 Solar Earnings: SUNE, FSLR, and CSIQ
4Q15 guidance
Canadian Solar (CSIQ) expects to ship 1.3 gigawatts (or GW) of solar (TAN) modules in 4Q15, generating $930 milion–$950 million in revenue during the quarter. Gross margins for 4Q15 are expected to be around 13%–15%.
Fiscal 2015 shipments are expected to be 4.1GW to 4.2 GW, whereas fiscal 2015 revenues are expected to be around $3.3 billion.
Analyst expectations
Wall Street analysts surveyed by Bloomberg expect the company to report $950.9 million in revenue in 4Q15 with earnings per share of $0.65. Analysts expect CSIQ’s 4Q15 revenue and earnings growth to be weaker than some peers’, including SunEdison (SUNE), SunPower (SPWR), and SolarCity (SCTY).
All eight analysts surveyed by Bloomberg have given a “buy” rating for the stock with an average target price of $31.24, implying expected returns of around 50% over next year, based on November 20’s closing price of $20.90.
The future
Canadian Solar has shown strong growth in shipments and revenues over the last few years.The company has also been successful in shifting its focus from Europe to North America. It has managed to scale up its total solutions business, which builds power plants.
However, the company’s profitability has taken a hit so far in fiscal 2015, implying that the company may be facing pricing pressure in the competitive market. With additional capacity, the pressure on its margins may escalate as the company tries to sell more modules.
The company has also shifted its focus to a building and operating model from its earlier building to sell model. The new model resembles SunEdison’s (SUNE). SunEdison has seen a bloated and highly leveraged balance sheet, primarily because of this model. So investors might want to keep an eye on CSIQ’s margins and balance sheet over the next few quarters.
Browse this series on Market Realist: