Canadian Solar Inc (NASDAQ: CSIQ)’s Strong Q2 Performance Propels Stock To New Heights

Yesterday, Canadian Solar Inc (NASDAQL CSIQ) released its quarterly earnings report for the second quarter of the 2014 fiscal year. In the report, the company beat consensus analysts’ estimates for earnings and revenues, and also release a strong guidance for the next quarter.

The solar energy company, which is based in Ontario, Canada, posted $623.77 million in revenue and a 33.8 percent year over year increase, which surpassed analysts’ predictions of $577.67 by 8 percent.

The company’s increased revenues may be due to an increased number of shipments to the United States, Germany, Japan, and the United Kingdom, as well as an increased demand from the Canadian utility sector, which caused larger average selling prices. Canadian Solar’s shipments on solar modules reached 646 megawatts by the end of the quarter, which was a sequential increase of 29 percent and 42 percent year over year.

The company’s net income was reported to be $55.8 million, which is a huge increase from the net loss of $12.6 million it posted one year ago. Canadian Solar’s adjusted earnings per share came in at $0.95 per share, such beat out estimates of $0.58 per share by 64.36%. This gain in net income is most likely due to the significant improvements in operating and gross margins. The company’s operating margin grew 7.7 points following a lackluster increase in research and development expenses and losses in foreign exchanges. The Canadian company’s gross margin increased to 4.7 points by 19 percent, beating out estimates of 17.8%. This growth was a result of average selling prices for higher solar modules, greater shipment volume, and strong execution of business strategy.

Canadian Solar is changing its focus towards servicing higher demand in the Americas region. This region made up about 55.5 percent of the company’s total revenue in the second quarter, which grew from 37.8 percent during the same quarter of last year. Revenues from Asia made up about 29.8 percent of the total revenues for this quarter, which fell from 51.6 percent one year ago. The total revenues from Europe this quarter grew from 10.6 percent one year ago to 14.7 percent this quarter.

The company also announced its preliminary guidance for the third quarter, and predicts that revenues will be in the range of $760 to $810 million, which is perfectly in line with analysts’ predictions of $784.67 million. The solar energy company expects shipments for solar modules to fall between 720 megawatts to 750 megawatts. At the same time, the company also expects its gross margins for the third quarter to be between 19 percent and 21 percent, which higher than the analysts’ consensus of 17.7 percent.

Canadian Solar Inc.(NASDAQ:CSIQ) is an undervalued opportunity that many investors in the solar and energy field are over looking. The company has been on a steady down trend as investors shy away from the solar sector. March of earlier this year was the company’s peak at $43.67. Currently the stock sits at 60% of the value of the prior high.

Can Canadian Solar Inc.(NASDAQ:CSIQ) still become the leading solar stock of 2014?

From 2009 to 2013, the company’s technology platform has contributed a total of 28.6% of the company’s earnings compared with just 11.5% in 2012. The company has faced a temporary dip as investors are concerned that China has enough quotas for solar installations. Due to the stock’s descent, this dip has provided investors with an attractive buying opportunity.

Canadian Solar’s positive earnings report also caused the shares of JA Solar Holdings Co Ltd (NASDAQ: JASO) and JinkoSolar Holding Co Ltd (NYSE: JKS) to grow at 3.8 percent and 3.11 percent respectively.