First Solar Earnings: Margins Shrink

S&P 500 (NYSE:SPY) component First Solar, Inc. (NASDAQ:FSLR) reported a drop to a loss in the first quarter driven by higher costs. First Solar designs and manufactures solar electric power modules using a proprietary thin film semiconductor technology.

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First Solar Earnings Cheat Sheet for the First Quarter

Results: Reported a loss of $449.4 million ($5.20 per diluted share) in the quarter. First Solar, Inc. had a net income of $116 million or $1.33 per share in the year-earlier quarter.

Revenue: Fell 12.4% to $497.1 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: First Solar, Inc. reported an adjusted net loss of 8 cents per share. By that measure, the company fell short of mean estimate of 48 cents per share. It fell short of the average revenue estimate of $688.2 million.

Quoting Management: “First Solar’s performance in the quarter was impacted by an aggressive competitive environment resulting from persistent supply-demand imbalances in the market, as well as restructuring costs that will improve our operating efficiency and help position us for the future,” said Mike Ahearn, Chairman of the Board. “Looking forward, we are confident we have the right long-term strategy and the right platform to enable long-term growth and value creation. We believe that by executing our strategic roadmaps and completing our restructuring program we can achieve our targets of 2.6 to 3.0 GW of sales in sustainable markets, earning a return on invested capital of 13 to 17 percent by 2016.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 30.3 percentage points to 15.4% from the year-earlier quarter. Over that time, margins have contracted on average 15.3 percentage points per quarter on a year-over-year basis.

The company has now missed analyst estimates for the last four quarters. It fell short by 31 cents in the fourth quarter of the last fiscal year, by 42 cents in the third quarter of the last fiscal year, and by 23 cents in the second quarter of the last fiscal year.

A year-over-year revenue decrease last quarter snaps a streak of two consecutive quarters of revenue increases. Revenue rose 8.3% in the fourth quarter of the last fiscal year and 26.1% in the third quarter of the last fiscal year.

Looking Forward: Over the past ninety days, the average estimate for the second quarter has fallen from 82 cents per share to 71 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from $4.10 a share to $3.96 over the last ninety days.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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