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.

Full Disclosure: None.

Canadian Solar Inc. (NASDAQ: CSIQ): Q4 Earnings Preview 2009

Canadian Solar Inc. (NASDAQ: CSIQ) is scheduled to release its fiscal fourth-quarter 2009 financial results before the market open on Wednesday, March 3, 2010. Analysts, on average, expect the company to report earnings of 50 cents a share on revenue of $265.93 million. In the year ago period, the company posted a loss of $1.42 per share on revenue of $73.01 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 conducts all of its manufacturing operations in China. The company has three manufacturing facilities located at Suzhou, Changshu and Luoyang in the People's Republic of China.

In the preceding fiscal-third quarter, Kitchener, Ontario-based company reported that its net income surged to US$ 25.34 million, or US$ 0.69 per share, from US$ 11.06 million or US$ 0.31 per share in the previous year. Revenue declined to US$ 213.13 million from US$252.36 million. Analysts, on average, expected the company to report earnings of $0.54 per on revenue of $210.65 million. Shipments surged to 102.6 MW from 60 MW for the three-month period.

In February, the solar module producer cut its fourth quarter gross margin outlook, citing higher processing costs and lower yields caused by certain defective production equipment at its new ingot and wafer plant as well as clearance and revaluation of certain aged solar cell inventory partly caused by the reduction of module average selling prices in December. The company said it now expects fourth quarter gross margin to be in the mid-teens, compared to its prior expectations for the high-teens, on a percentage basis.

However, Canadian Solar said it expects fourth quarter shipments to be slightly higher than its prior guidance for shipments of about 128 MW to 138 MW. Earlier, the company had said that for fiscal 2010, Canadian Solar anticipates shipments to range between 600 MW and 700 MW.

The company expects that the expansion of its internal cell facility in first half of 2010 will help it to further offset ongoing industry pricing pressure, while at the same time increasing our manufacturing process control.

The company expects to more than double its shipments in 2010 and are preparing its capacity expansion accordingly. The company plans to increase its solar module production capacity from existing 820 MW to 1 GW by the end of April 2010, and to increase its internal cell production capacity from 420 MW to 700 MW by June 2010.

Recently, Chief Executive Shawn Qu said that Canadian Solar Inc. is holding "extensive" discussions with U.S. power companies to develop photovoltaic solar projects. Solar manufacturers are competing to win business from U.S. electricity utilities because the size of those projects tends to be much larger than projects to install panels on the commercial rooftops.

In January’s PV USA (PTC) ratings, the company received the highest PTC ratings for its solar modules. Solar modules from Canadian Solar were ranked as one of the highest performing modules.

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.

The demand for solar power products has picked up after a difficult 2009, when the turmoil in the credit market forced financial players to abandon U.S. solar energy projects. The 2008 collapse of top solar financier Lehman Brothers and the freeze-up in the global credit markets drove nearly all banks to halt funding for major new solar projects, forcing the makers of systems that turn sunlight into electricity to cut prices for their products and sending their stocks crashing. The problems of solar companies had been further compounded by an oversupply of polysilicon, a material used in solar panels.

The solar industry is poised to benefit from growing attention to global warming, skyrocketing oil prices, cheap financing and technological advances. At the Copenhagen Summit held in December 2009, the five major polluters of the world agreed to take action to reduce CO2 aggressively, with $100B per year pledged to help developing nations adopt green energy technology to cut greenhouse gas. Meanwhile, the US, China, Brazil and India continue to invest heavily in wind and solar energy with China's $454B in the next 5 year period as the most aggressive one. As part of the stimulus bill signed last year, the federal government approved around $60 billion in loan guarantee authority and $30 billion in energy grants for renewable energy and transmission companies. Congress has also granted a 30% renewable-investment tax credit to help expand the development of alternative sources of energy.

In the near term, the solar industry is facing an important challenge in the form of reduced government subsidies. Globally, solar industry depends upon government subsidies and incentives and support to remain competitive. However, recent developments suggest that subsidies will inevitably be reduced or phased out. According to media reports, the German government is planning to cut solar subsidies for new roof and open-field sites from April by 16 percent to 17 percent. Additional cuts to the subsidies will be made from 2011 if solar projects amount to more than 3,000 megawatts, and even more if they total more than 3,500 megawatts. Already, France in January slashed the tariffs for electricity produced from rooftop solar panels by 24 percent. Spain too has taken similar steps. Revenue from the European market in the third quarter accounted for 87.6% of the company’s sales, marginally down from 88.1% in the year-ago quarter.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 9.35 and 0.67. In terms of stock performance, Canadian Solar shares have gained nearly 430% over the past year.

Full Disclosure: None.