session thus far currently has solar play Canadian Solar (CSIQ
17.36, +0.57, +3.39%) higher in reaction to the company’s solid first quarter revenue
Canadian Solar doubled its revenues in the first quarter with $1.42 bln in sales through the first three months of the year, growth of 110.5% compared to a year ago. Revenue strength was due in part to solid total solar module shipments. In the first quarter, total shipments were 1,374 MW, compared to 1,831 MW in the fourth quarter of 2017, and first quarter 2018 guidance in the range of 1.30-1.35 GW.
Net revenue from the total solutions business as a percentage of total net revenue was 64.2% compared to 36.4% in the fourth quarter of 2017. Also, during the quarter Canadian Solar completed the sale of three solar power plants in the U.S. totaling 309 MWp to the Korea Electric Power (KEP 16.72, -0.19 -1.1%) for about $720.0 mln and completed the sale of 142 MWp of solar power plants in the UK for about GBP 191.2 mln ($267.7 mln) to Greencoat Capital LLP.
Net income attributable to Canadian Solar was $43.4 mln, or $0.72 per diluted share, as gross margin fell to 10.1%, compared to 19.7% in the fourth quarter of 2017, but within the Q1 guidance range of 10.0-12.0%. The sequential decrease was primarily due to the low margin associated with 309 megawatt of U.S. solar power plants sold to KEPCO, combined with higher blended module manufacturing costs, with a partial offset from an increased module average selling price in the first quarter of 2018.
Management noted inventories at the end of the first quarter of 2018 were $414.1 mln, compared to $346.1 mln at the end of the fourth quarter of 2017. Inventory turnover in the first quarter of 2018 was 28 days, compared to 35 days in the fourth quarter of 2017.
As to guidance, Canadian Solar sees second quarter total solar module shipments to be in the range of about 1.50-1.60 GW, including about 100 MW of shipments to the company's utility-scale, solar power projects that may not be recognized as revenue in second quarter 2018. Canadian Solar projects total revenue for the second quarter of 2018 to be worse than market expectations in the range of $690-$730 mln. Gross margin for the second quarter is expected to be between 20.0-22.0%.
This earnings report comes against a backdrop of last week’s vote in California to require all new homes to house solar energy panels by 2025. An obvious bullish development in the solar space, though not implemented for a few years, the California solar law was widely expected as the state has seen energy shortages in the past.
Management struck a favorable tone on the conference call, as shares have reversed opening losses. The stock briefly touched its 50-day simple moving average (16.13) and has progressed nicely through the 200-day (16.48) on its way to gains of 2.9% at this juncture.
Today's gains have allowed the Guggenheim Solar ETF (TAN 26.85, +0.56, +2.1%) to break out to better than two-year highs. CSIQ is a top 15 holding in the ETF with a roughly 4.2% weighting.
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