When the market starts yawning at blowout earnings reports, you know the expectations have been set high. The danger at that point is being the one company to miss expectations and watching you stock sink faster than Charlie Sheen's career.
Revenues were up by 78.1% from last year to $452.7 million in the quarter, as shipments reached 237 megawatts. But net income of $25.5 million, or $0.58 per share, fell short of analyst expectations of $0.65. Not something you want to do when competitors such as Yingli Green Energy
As if missing earnings estimates weren't bad enough, Canadian Solar also expects its gross margin to decline to 14% to 15% in the first quarter from a measly 17% this quarter. That figure compares with a 31.4% gross margin at competitor Trina Solar. So with prices expected to fall during 2011, Canadian Solar doesn't have a lot of room for error.
On the plus side, although analysts may have been disappointed, investors didn’t exactly have high expectations for 2011 in the first place. Before this report came out, earnings per share were expected to be $2.12, and the stock currently trades near $11. That's a ridiculous P/E ratio of 5.2, so there's some upside potential if the company can perform better than Mr. Market currently believes it can.
Canadian Solar isn't coming close to being on life support, in the style of Evergreen Solar
Solar stocks have been crushed almost across the board since Canadian Solar's report came out. Maybe it was time for a correction, but it looks as though Canadian Solar was the one pushing investors off the edge.
More on Solar:
- The Solar Roller Coaster Continues
- Investors See Clouds Over First Solar
- Suntech Power Falls Behind in Solar
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Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.
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