How Trina Solar Beat Analysts’ Estimates for 2Q16 Net Income
Trina Solar’s operating income
Trina Solar’s (TSL) operating income for 2Q16 came in at about $83.7 million, compared to analysts’ consensus expectation of $40.2 million. The deviation from analysts’ expectation was primarily due to greater-than-anticipated shipments in 2Q16, accompanied by lower operating expenses as a percentage of net revenues, as we discussed in the preceding part of this series.
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Also, the company reported its other operating income (which mainly represents income from electricity generated from the company’s downstream solar power projects that are recorded as current assets on the balance sheet prior to the sale of the projects ) at about $7.1 million for 2Q16, compared to $3.3 million in 1Q16 and $0 in 2Q15.
Trina Solar’s (TSL) net income came in at about $40.3 million in 2Q16, compared to analysts’ consensus expectation of about $31.2 million. The company reported net income of about $26.6 million in 1Q16 and about $40.9 million in 2Q15.
Analysts expect Trina Solar to report about $11.4 million in net income in 3Q16 and about $3.8 million in 4Q16.
Why was there a deviation?
The deviation from analysts’ expectations was mainly due to higher operating income on account of higher shipments in 2Q16. However, the increase in interest expenses and foreign exchange losses led to a marginal decrease in net income on a YoY (year-over-year) basis.
Solar (TAN) module manufacturing is a capital-intensive process. It’s very important for upstream solar companies such as First Solar (FSLR), SunPower (SPWR), SunEdison (SUNEQ), Trina Solar, Yingli Solar (YGE), and Canadian Solar (CSIQ) to maintain healthy balance sheets to raise capital at low costs.
In the next part of this series, we’ll look at Trina Solar’s financial condition and manufacturing capacity at the end of 2Q16.