Trina Solar Limited (ADR) (NYSE:TSL) released its latest earnings report on Tuesday, just barely edging out earnings estimates but missing on revenue. The solar module maker reported earnings of 14 cents on $519.4 million in revenue. Analysts had been expecting earnings of 13 cents on $557 million in revenue for the quarter.

Trina Solar

RBC Capital analysts say the revenue miss was mostly due to higher shipments to China, which resulted in a lower average selling price for the second quarter.

Trina Solar sees rising demand in China

The solar panel company reported total shipments of 943.3 megawatts, which included 148.7 megawatts in project shipments. That’s a little lower than the previously provided guidance range of between 950 megawatts and 1,010 megawatts in total shipments. Trina Solar had guided for between 150 megawatts and 170 megawatts in project shipments for the quarter.

The company’s average selling price fell from 67 cents to 65 cents because shipments to China increased. As management had previously said, demand for its solar cells increased in China in the second quarter. The Asian nation made up 34% of Trina Solar’s total shipments, a significant increase from the first quarter’s 12%.

Trina Solar reiterates guidance

The company said demand for its solar cells remains robust in China and expects that between 30% and 35% of its overall shipments in the third quarter will be to China. Trina Solar reiterated its third quarter guidance of between 1.06 gigawatts and 1.12 gigawatts in total shipments. For the full year, the company continues to expect total shipments of between 3.6 gigawatts and 3.8 gigawatts. This would imply flattish fourth quarter shipments.

Currently Trina Solar is running at full capacity, although it expects to increase capacity to 3.8 gigawatts in solar modules by the end of this year. The company is seeking new manufacturing facilities in China and elsewhere.

Downstream business going well

The solar module maker also reiterated its project completion target of between 400 megawatts and 500 megawatts for this year. Management said 85% of its projects are in China. So far this year, Trina Solar has completed 24 megawatts worth of projects and has about 310 megawatts in projects currently under construction. The company also has between 66 megawatts and 166 megawatts in projects under development.

As of the end of the second quarter, Trina’s project pipeline was at about 682 megawatts, according to RBC Capital analysts. As management previously said, they expect to sell most of their overseas projects but keep most of their China projects on their balance sheet.

Trina Solar sees weak average selling prices

In their report dated Aug. 26, 2014, RBC analyst Mahesh Sanganeria and associate Shawn Yuan said in addition to the decline in average selling price, lower than expected shipments also impacted Trina Solar’s revenue miss. They also note that the solar module maker did not recognize any revenue from projects during the quarter.

The company reported a gross margin of 15.4% for the quarter, which was slightly better than the guidance of in the mid-teens. Management guided for a slightly lower gross margin in the next quarter because of higher China shipments. They reaffirmed their previous expectations for a full year gross margin of in the mid-teens. The RBC team thinks this level is “more sustainable” for the company.

Updating estimates

They updated their estimates for Trina Solar based on these results. They increased their third quarter revenue estimate from $636 million to $665 million but kept their earnings per share estimate at 11 cents. They cut their full year revenue estimate from $2.385 billion to $2.284 billion and their estimates estimate from 74 cents to 70 cents per share.

However, they bumped up their 2015 full year estimate from $2.611 billion to $2.652 billion and their earnings per share estimate from 66 cents to 74 cents per share. The RBC Capital team maintained their $15 per share price target and Sector Perform rating on Trina Solar.