First Solar Earnings: What Should the Market Be Looking For?

Source: Thinkstock

Source: Thinkstock

First Solar Inc. (NASDAQ:FSLR) will announce first-quarter earnings on Tuesday after the bell. After missing last quarter’s estimates, we’ll be looking for a more stable earnings report, mostly attributed to low expectations and other market factors. But first, let’s recap the last quarter:

  • Reported revenue of $768 million, down 28.6 percent on the year.
  • GAAP earnings of 64 cents per share, compared against year-ago earnings of $1.74 per share.
  • Non-GAAP earnings of 89 cents per share, below estimates of 99 cents.
  • Disappointing guidance for the first quarter:
    • Net sales in a range between $800 million and $900 million
    • EPS of 50 cents to 60 cents per fully diluted share

This disappointing guidance should help prevent any overly optimistic expectations. Over-the-top enthusiasm over First Solar’s stellar third-quarter earnings set up fourth-quarter disappointment, despite First Solar revising estimates lower than analyst estimates. For this quarter, there is no overly optimistic sentiment, as everyone looks to see which direction earnings will go.

Despite First Solar’s low guidance, utility solar continues to have a brighter future. The U.S. Energy Information Administration reports that there was strong growth for solar in 2013 and noted that “solar provided 22% [new utility-scale generating capacity], up from less than 6% in 2012,” with the majority of this growth in California.

EIA Power PLants

Source: Energy Information Administration

There are several milestones reported by First Solar in 2013 that we want to keep in mind when looking at First Solar’s first-quarter earnings report. The company:

  • Reduced the average module manufacturing costs at its best plant by 17 percent, from 64 cents per watt in the fourth quarter of 2012 to 53 cents per watt in the fourth quarter of 2013.
  • Added approximately 1.7 GWDC of new projects to the company’s project pipeline.
  • Acquired TetraSun to expand addressable market opportunity.
  • Completed its first utility-scale project in the Middle East and the largest operating solar PV plant in the region.

What’s important is that trends and advantages from these milestones begin or continue to be realized without complications or setbacks. Current developments in efficiency, additional utility projects, and continued results from the company’s TetraSun acquisition are crucial for First Solar’s continued growth.

News releases from First Solar during the first quarter would suggest that all these trends are heading in the right direction. The firm has announced a new world record in thin-film module efficiency of 17 percent; a new world record for CdTe solar cell efficiency of 20.4 percent; the start of a 250MW solar project; and a new 20-year PPA for the 52MW Jordan Project. This is all good news and will help instill confidence in First Solar’s long- and short-term potential.

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