Canadian Solar Inc. (NASDAQ: CSIQ) is one of the stranger earnings reports where things looked good at first blush. Then came the company’s guidance, and the reaction has been for a very bad day. Earnings per share came in at $1.61, higher than last year’s $0.99 per share and better than the $1.16 consensus estimate. The quarterly revenues of $901 million also exceeded the consensus estimate of $872 million.

The company’s total fourth quarter solar module shipments were 1,951 MW, versus 1,590 MW in the third quarter of 2018 and versus its fourth-quarter guidance of 1.9 GW to 1.95 GW. The company also recorded higher operating costs, higher selling costs, higher general and administrative costs, higher research and development costs, and a higher income tax expense.  One more issue is that manufacturing modules is expected to be less profitable after factoring in Chinese currency appreciation issues.

The company’s balance sheet had $941.0 million of cash, cash equivalents and restricted cash at the end of 2018. The company had also seen a rise in its most recent short selling activity, and the short sellers appear to have been correct here.

For the first quarter, the company sees profits low or even negative based on lower production and sales and sees a substantial drop in margin. That revenue forecast was $450 million to $480 million, but that’s less than half of the sales last year in the same quarter.

Canadian Solar’s full-year revenue guidance was put in a range of $3.5 billion to $3.8 billion, with the mid-point being under the $3.74 billion consensus estimate. The company also forecast that profits in 2019 would be under that of 2018, blaming lower average selling prices on its solar modules and slower solar projects hurting.

During the fourth quarter, Canadian Solar completed sales of the Garland and Tranquility solar power plants and the Mustang 2 solar power project in the U.S., solar power plants in China and its 20% interest in the Pirapora portfolio in Brazil. As of February 28, 2019, its portfolio of utility-scale solar power plants in operation was approximately 986 MWp, and the estimated total resale value was listed as being about $1.2 billion.

Dr. Shawn Qu, board chair and chief executive officer of Canadian Solar, said:

2018 was a record year for us as our revenue, total module shipments and gross margin all exceeded our expectations for both the fourth quarter and full year 2018. Our integrated business strategy and commitment to profitability helped us achieve a new high for Canadian Solar, as we delivered net income of $3.88 per diluted share. The acceleration on the sale of certain solar power projects also positively contributed to the revenue and profit in 2018. However, this will reduce our project sales revenue and profit in 2019, as noted in our outlook. Our portfolio of solar power plants in operation as of February 28, 2019 was approximately 986 MWp, with an estimated total resale value of approximately $1.2 billion. Our portfolio of late-stage, utility-scale solar power projects as of February 28, 2019, including those under construction, was approximately 2.9 GWp. Our focus remains on downstream Energy Business where we can leverage our expertise and competitive advantage to deliver a higher return on investment.

Shares of Canadian Solar were last seen down a sharp 18% at $19.20 in late-afternoon trading on Thursday and its market cap was $1.12 billion. It has a 52-week trading range of $11.37 to $25.89.

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