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Canadian Solar Beat Analysts’ 1Q16 Adjusted Net Income Estimates

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Canadian Solar’s adjusted EBIT

Canadian Solar’s (CSIQ) adjusted EBIT (earnings before interest and tax) for 1Q16 came in at $38 million, compared to analysts’ consensus expectation of $16 million. The deviation from analysts’ expectation was primarily due to greater-than-anticipated shipments, which resulted in higher revenue.

For 1Q16, CSIQ’s interest expenses came in at $16.1 million compared to $17.1 million in 4Q15 and $11.2 million in 1Q15.

As of March 31, 2016, Canadian Solar had an interest coverage ratio (number of times interest payments can be made with current earnings) of 2.4, a fall from 7.0 as of March 31, 2015.

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Net adjusted income

Canadian Solar’s (CSIQ) adjusted net income came in at $21.3 million in 1Q16, compared to analysts’ consensus expectation of $5.7 million. The company reported adjusted net incomes of $62.3 million in 4Q15 and $61.3 million in 1Q15.

Moving ahead, analysts expect Canadian Solar to report $21.9 million in adjusted net income in 2Q16.

While comparing the financial data of upstream solar companies such as Canadian Solar, it’s important to consider their revenue recognition models. The revenue recognition process may not be linear. As a result, reported income can fluctuate widely.

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), and Canadian Solar to maintain healthy balance sheets to raise capital at low costs.

In the next part of this series, we’ll look at Canadian Solar’s financial condition.

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