Tuesday, May 10, 2011

Canadian Solar Inc. (NASDAQ: CSIQ): Q1 Earnings Preview 2011

Canadian Solar Inc. (NASDAQ: CSIQ) is scheduled to release its first-quarter earnings before the opening bell on Thursday, March 10, 2011. Analysts, on average, expect the company to report earnings of 41 cents per share on revenue of $423.49 million. In the year ago quarter, the company reported earnings of 3 cents per share on revenue of $336.93 million.

Canadian Solar Inc., together with its subsidiaries, engages in the design, development, manufacture, and marketing of solar cell and solar module products that convert sunlight into electricity for various uses in Canada and internationally. Its products include a range of standard solar modules for use in various residential, commercial, and industrial solar power generation systems. The company has seven manufacturing facilities located at Suzhou, Changshu and Luoyang in China. It is also constructing a module plant in Ontario, Canada. The company operates in 7 countries: Canada, China, Germany, Italy, Japan, Korea, and the United States.

Canadian Solar offers one of the broadest crystalline silicon solar module product lines in the industry, ranging from modules made of medium power, low-cost upgraded metallurgical-grade silicon, to high efficiency, high power output mono-crystalline modules, along with a range of specialty products.

In the preceding fourth quarter, the Ontario, Canada-based company'net income was $25.5 million, or 58 cents per share, compared to a loss of $15.6 million, or 38 cents per share, in the same quarter last year. Revenue surged to $452.7 million from $254.2 million a year before. Analysts, on average, expected the company to report earnings of 65 cents per share on revenue of $417.56 million. 

At it last earnings call in March, the company said it expects first-quarter shipment levels to be almost in line with fourth quarter of 2010, despite unfavorable weather conditions in Europe and North America. For full year 2011, the company reaffirmed its earlier guidance, anticipating shipments of about 1,200 MW to 1,300 MW.

The company is expanding factories more than 60 percent this year, aims to increase its market share as global overcapacity among manufacturers squeezes out smaller rivals.

The company is likely to benefit from a geographically-diversified customer base, ongoing expansion programs, improving operating efficiencies, rising gross margins, material cost savings through its vertically-integrated production structure, higher captive generation of solar cells and higher conversion efficiency.

Solar industry as a whole has benefited from continued strong demand thanks to growing awareness about global warming, skyrocketing oil prices, cheap financing and technological advances. Companies involved in the production of semiconductors used in solar panels have enjoyed a positive quarter. Many have experienced rising shipments over the last few quarters, resulting in a sequence of record quarters. The world is becoming increasingly environmentally conscious. Both commercial and private demand for solar power is rising. Solar options are becoming more attractive as more governments provide better options for buildings producing solar power to feed into and out of the grid as required. US President Barack Obama has called for 80 percent of the nation's electricity to come from clean sources by 2035. Meanwhile, China has doubled its target for installed photovoltaic power capacity over the next five years to 10 gigawatt by 2015. The government has also raised its installed solar capacity target for 2020 to 50 GW, up from the previous goal of 20 GW.

Thanks to better cost advantages, Chinese solar module maker have grabbed more market share from their international competitors. Local solar companies have also benefited from China's well-developed supply chain, cheap electricity, supportive policies and even low environmental standards.

However, the solar industry relies on government incentives to make electricity created by the sun competitive with sources such as coal and natural gas. Many governments, particularly in Europe, have implemented generous subsidies for solar power in recent years as they seek to reduce their reliance on fossil fuels and combat climate change. Late in February, German lawmakers passed a law, cutting solar power subsidies by up to 15 percent from this summer, six months ahead of schedule, dealing a blow to the world's biggest photovoltaic market. Similarly, Italy’s government recently approved a decree that reduces incentives to solar projects. The Italian solar market became the second-largest in Europe following Germany last year after the government offered the highest feed-in tariffs in the region.

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