(Canadian Solar earnings story updated for market close, and with analyst comments on Canadian Solar eanings.)

ONTARIO, Canada ( TheStreet) -- Canadian Solar ( CSIQ) fourth-quarter earnings, announced on Wednesday morning during the pre-market, were a fait accompli -- the solar company had pre-announced in mid-February. Canadian Solar's optimistic guidance for 2010 is more likely to be the focus of investors on Wednesday.

Canadian Solar came in with a record fourth quarter in revenues ($287 million) and shipments (155.5 megawatts), and gross margins of 15.4%, in the mid-teens level it told investors to expect after problems at its new ingot and wafer plant caused higher costs and lower yields in the fourth quarter.

Canadian Solar's revenue level in the fourth quarter bested the street estimate of $267 million, however, Canadian Solar fell short on earnings per share, with EPS of 35 cents, below a street estimate of 46 cents for the quarter.

The shortfall on EPS by Canadian Solar could have been caused by the higher costs associated with its new plant slowdown, as well as foreign exchange losses that Canadian Solar said equaled $5 million in the fourth quarter. Additionally, Canadian Solar stated that it had increased sales, general and administrative (SG&A) expenses during the quarter, to support increased year-end shipments and to prepare for a big 2010. SG&A expenses were almost double the previous quarter and the fourth-quarter 2008 levels.

How big a 2010 does Canadian Solar predict in terms of ramping up spending ahead of it?

Notably, Canadian Solar did not provide revenue guidance for 2010 in the earning release. In 2009, Canadian Solar had provided early year revenue guidance with a high-end of $800 million. Canadian Solar finished the year at $663.8 million in revenues.

Canadian Solar said in the first quarter of 2010, it expect shipments of approximately 180 MW to 190 MW and gross margin again in the mid-teens, potentially indicating that the combination of a decline in average sales price across solar, foreign exchange risk, and its remediation efforts with its plant production problems, will continue to keep its margins lower than its loftiest margin ambitions.

Canadian Solar said that by the second quarter of 2010 it expects a positive margin contribution from its new plant.

For the full year of 2010, Canadian Solar reiterated expectations that shipments will be in the range of 600 MW to 700 MW.

Canadian Solar faced questions on the earnings conference call about the second half outlook, or lack thereof.

A Piper Jaffray analyst, Min Xu, asked Canadian Solar management if its bullish guidance for the first half of 2010, coupled with its overall shipment guidance for the year, implied a disappointing second half of the year.

Canadian Solar CEO Shawn Qu answered the Piper analyst by saying that the solar company is merely saying it is too early in the year to provide full year guidance. Canadian Solar's Qu said he believes the second half of 2010 pipeline will be strong, but would rather wait until there is more visibility before offering specific guidance.

A Deutsche Bank analyst asked Canadian Solar if the second half of 2010 would be a "less severe" version of the second half of 2008, in terms of average sales price and utilization declines. If so, was Canadian Solar being conservative in its guidance as a result of this expectation, the analyst asked.

Canadian Solar CEO Qu again focused on the clear visibility for the first two quarters of the year. Qu said Canadian Solar does expect strong demand in the second half of the year from markets including Italy and the Czech Republic.

However, Qu stuck to the talking point that the solar industry is still trying to gauge the impact of the German feed-in tariff reduction, and Canadian Solar has decided to wait until later in year to provide clear guidance.

A Lazard analyst asked Canadian Solar management about its higher-than-normal operating expenses in the fourth quarter.

The Canadian Solar CEO said that in the first quarter, the solar company expects expenses to go back down to 7% of sales.

Canadian Solar predicts its biggest markets, including Germany, will all continue to make major contributions in 2010: Germany, Italy, the U.S., the Czech Republic, Korea and Spain. What's more, newer markets, such as Canada, Japan and France are being targeted.

Canadian Solar CEO Shawn Qu said, "Demand is expected to be very strong for all of 2010. In the 1Q10, we are expecting shipments growth over 4Q09 with further sequential shipments growth in 2Q10. For the second half of the year, we expect the improved cost structure to result from both lower processing costs and from increased internal cell capacity."

One question mark will continue to be the growth rate for the U.S. and China versus the decline in Europe. In the fourth quarter, Canadian Solar shipments to Europe decreased by 5%, while deliveries to the U.S. and Asia increased by almost the same percentage.

Canadian Solar ended trading on Wednesday up 1.5%, with one million shares above it average daily volume traded.

-- Reported by Eric Rosenbaum in New York.


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