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Shares of solar manufacturing giant Canadian Solar Inc. (NASDAQ: CSIQ) fell as much as 11.1% on Tuesday after the company reported fourth-quarter 2016 financial results. And shares fell throughout the day, currently trading down 10.4% at 2:40 p.m. EDT.
Revenue fell 40.3% in the fourth quarter to $668.4 million and the company swung from net income of $62.3 million to a net loss of $13.3 million, or $0.23 per share. There was a $44.1 million charge associated with a true-up on tariffs, and if that charge is pulled out, adjusted net income was $14.2 million, or $0.24 per share. Both results fell well short of Wall Street's expectations for $690.3 million in revenue and $0.32 per share in earnings.
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A sharp decline in solar panel prices in 2016 hurt financial results and Canadian Solar couldn't offset that with high margin project sales, which have helped results in the past. The company will still have to contend with rising supply and potentially shrinking demand in 2017. The formula won't be one that will likely lead to much in the way of profits.
Commodity solar suppliers like Canadian Solar are in a rough position right now. The company has scale to supply nearly 10% of the world's solar panel installations this year, but there's a vast amount of overcapacity, which is hitting panel prices and margins. The result will be tough financial conditions in 2017 and, with over $3 billion in debt, there's a lot of risk for investors as well. Unless we see demand for solar panels rise and competitors reduce production (potentially through bankruptcy), I don't see how financials will get much better for Canadian Solar in the near future.
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