Solar cell manufacturer Canadian Solar Inc. CSIQ reported second-quarter earnings of 31 cents per share, comfortably beating the Zacks Consensus Estimate of 13 cents by 138.5%. Quarterly earnings however decreased considerably from 95 cents per share in the year-ago quarter.

Total Revenue

Canadian Solar posted second-quarter revenues of $636.7 million and surpassed the Zacks Consensus Estimate of $627 million by 1.5%. Total revenue was 2.1% higher than $623.8 million reported in the prior-year quarter.

Of the total revenue, the American markets comprised 47.6%, Asia and other markets represented 46.5% and the European markets contributed 5.9% compared with 55.5%, 29.8% and 14.7% from the year-ago quarter.

Operational Update

Solar module shipments in the reported quarter totaled 850 megawatt (“MW”), up 31.5% from 646 MW in the year-ago quarter. The figure however missed the company’s guidance range of 950 MW to 1000 MW.

Gross profit was $96.5 million, down 18.4% from the year-ago profit of $118.2 million. Gross margin was 15.2% in the quarter, compared with 19% in the prior-year quarter.

Total operating expenses were $64.1 million in the quarter, up 26.8% year over year. Operating expenses escalated primarily due to higher selling, general and administrative as well as research and development expenses.

Selling expenses totaled $32.2 million in the reported quarter, up 9.4% year over year. General and administrative expenses were $27.5 million, up 51.5% year over year. Research and development expenses were $4.3 million, up from $2.9 million a year ago.

Interest expenses increased to $12.9 million from $12.8 million in the year-ago quarter.

Financial Update

As of Jun 30, 2015, cash and cash equivalents were $403.3 million, lower than $549.5 million as of Dec 31, 2014.

Long-term debt as of Jun 30, 2015, was $353.2 million, up from $134.3 million as of Dec 31, 2014.

Guidance

For the third quarter of 2015, Canadian Solar expects shipments of 970 MW to 1,020 MW. Total revenue is expected in the range of $570 million to $620 million, with gross margin between 12% and 14%.

For the full year, Canadian Solar maintains its expectation of total module shipments in the range of 4 to 4.3 gigawatts. Total revenue is expected to be $2.8 billion to $3.0 billion.

Peer Releases

SolarCity Corp. SCTY, the largest U.S. rooftop solar installer, posted wider loss in the second quarter of 2015. It reported an adjusted loss of $1.61 per share, in line with the Zacks Consensus Estimate.

First Solar Inc. FSLR reported adjusted second-quarter 2015 earnings of 52 cents a share (after adjusting for a $42 million benefit from discrete tax item), beating the Zacks Consensus Estimate of 7 cents by a whopping 643%.

SunPower Corp. SPWR reported second-quarter 2015 adjusted earnings per share of 9 cents, lagging the Zacks Consensus Estimate of 14 cents by 35.7%.

Our View

Canadian Solar is progressing on both module sales and downstream energy business. The company also has the potentia to tap growing solar markets in Asia. Currently, the company has a 338 megawatt-peak (“MWp”) and 617 megawatt-peak (“MWp”)  projects under development in China and Japan, respectively.

Canadian Solar presently holds a Zacks Rank #3 (Hold).

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