March 10, 2011 / 3:58 PM / in 7 years

UPDATE 3-Canadian Solar results disappoint, shares plummet

* Q4 EPS 58 cents vs Street view 65 cents

* Q4 revenue $452.7 mln vs Street view $417.56 mln

* Shares slide 17 pct, news weighs on solar sector (Adds analyst comment, updates share activity, adds share movement of other solar stocks)

NEW YORK, March 10 (Reuters) - Canadian Solar Inc (CSIQ.O) posted lower-than-expected fourth-quarter earnings and said some Italian customers were seeking to postpone orders, sending its shares tumbling 17 percent and weighing on the solar sector as a whole.

The company also said first-quarter profit margins would lag expectations due to higher raw material costs, lower selling prices on its solar products and slower production rates during Chinese holidays.

“With cost challenges at the forefront and Italian subsidy risk for the sector in the backdrop, we believe investors will be skeptical on (Canadian Solar’s) earnings power over the next several quarters,” Wells Fargo analyst Sam Dubinsky said in a note to clients. Dubinsky has a “market perform” rating on Canadian Solar shares.

The maker of photovoltaic solar systems that turn sunlight into electricity posted net income of $25.5 million, or 58 cents per share, below analysts’ average estimate of 65 cents a share, according to Thomson Reuters I/B/E/S.

In the same period a year ago, the company recorded a loss of $15.6 million, or 38 cents per share.

Revenue rose 78 percent $452.7 million, topping the $417.56 million that analysts had forecast.

The Ontario-based company — which has most of its manufacturing in China — is sticking with its 2011 shipments outlook of 1,200 to 1,300 megawatts and expects first-quarter shipments to be in line with the fourth quarter’s 237 MW, CEO Shawn Qu said on a conference call.

Moves by Italy to reduce its support for solar energy have prompted some customers there to try to postpone shipments, he said, although demand increases in other countries should offset any declines.

Investors in solar stocks have punished the sector in the last year on worries that declining incentives for solar power systems in top markets like Germany and Italy will dampen demand this year and send prices on solar panels tumbling faster than producers are prepared for.

Canadian Solar’s comments on Thursday added fuel to those fears, and shares of rival solar companies — including Suntech Power Holdings Co Ltd STP.N, JA Solar (JASO.O), Trina Solar TSL.N, SunPower SPWRA.O and Yingli Green Energy (YGE.N) — fell sharply.

Canadian Solar’s Qu said the company’s gross margins would decline to between 14 percent and 15 percent in the first quarter from 17 percent in the fourth quarter.

Canadian Solar shares were down 17 percent, or $2.35, to $11.35 in afternoon Nasdaq trading. They hit a low of $11.32 earlier in the session, their lowest level since last August. (Reporting by Nichola Groom in Los Angeles, Matt Daily in New York and Swetha Gopinathi in Bangalore; Editing by Robert MacMillan, Maureen Bavdek and John Wallace)

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