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Why Analysts Expect Canadian Solar’s Revenue to Rise in 2Q16

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Canadian Solar’s revenue estimate

Canadian Solar (CSIQ) reported about $637 million in consolidated revenue for 2Q15. Analysts estimate that the company will report revenue of about $726 million in 2Q16.

This would be a rise of nearly 14% YoY (year-over-year), mainly due to the anticipated rise in revenue recognized from the company’s sale of its late-stage power projects.

According to company filings, Canadian Solar expects to derive a substantial portion of its 2016 revenue from the completion of its backlog projects in the United States. Currently, these projects are categorized as late-stage projects. The company expects to complete the sale of these projects in 2016.

Also, analysts expect the company’s gross margins to improve in 2H16. Analysts’ expectations are in line with the company’s 2016 guidance.

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2016 guidance

After its 1Q16 earnings, Canadian Solar revised its 2016 revenue guidance up from $2.9 billion–$3.1 billion to $3.0 billion–$3.2 billion. CSIQ anticipates that a major portion of this revenue will come from the complete or partial sale of its operating solar power assets in 2H16.

For 2016, the company has maintained its total module shipments guidance of ~5.4 GW (gigawatt) to 5.5 GW, with about 5.0 GW to be recognized in revenue.

For 2Q16, Canadian Solar expects its revenue to be in the range of $710 million–$760 million. Also, the company expects its gross margin to be in the range of 15%–17%.

When comparing the financial data of upstream solar (TAN) companies such as First Solar (FSLR), SunEdison (SUNEQ), SunPower (SPWR), Trina Solar, and Canadian Solar, it’s important to consider their revenue recognition models. The revenue recognition process may not be linear. As a result, companies’ reported revenues can fluctuate within wide ranges, affecting their margins.

In the next part of our series, we’ll take a close look at Canadian Solar’s 2Q16 margin estimates.

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