First Solar Misses Earnings, Keeps View

Zacks

First Solar Inc. (FSLR) reported adjusted first quarter 2013 earnings of 69 cents per share, below the Zacks Consensus Estimate of 75 cents by 6 cents and down 66.2% from the preceding quarter. This was primarily due to brief construction delays at the AVSR project and planned lower manufacturing utilization.

However, the company swung to a profit in the reported quarter after it incurred a loss of 8 cents (excluding restructuring charges) in the year-ago period, helped by higher sales of solar modules.

On a reported basis, earnings came in at 66 cents in the reported quarter as compared to a loss of $5.20 per share in the first quarter of 2012 and earnings of $1.74 in the fourth quarter of 2012.

Revenue

First Solar − the largest U.S. solar manufacturer by shipments − reported a top-line surge of almost 52% to $755.2 million from $497.0 million in the same period last year. Revenues also beat the Zacks Consensus Estimate of $730.0 million. The improvement was mainly attributed to high sales volumes for third-party module sales and an increase in revenues from systems projects.

However, the number decreased 29.7% sequentially due to fewer revenue recognition from its systems business projects primarily related to the Topaz project.

Gross profit in the reported quarter was $169.3 million versus $76.7 million in the year-ago period.

On the cost front, total operating expenses significantly declined to $108.1 million from $533.0 million in the first quarter 2012.

Financial Performance

First Solar reported $842.8 million of cash and cash equivalents at the end of the first quarter, down from $901.3 million at year-end 2012. Long-term debt was $562.2 million (including current portion) versus $562.6 million at year-end 2012. The debt-to-capitalization ratio was 13.3% in the reported quarter.

Guidance

The company reiterated its forecast of $3.8 billion to $4 billion of total revenue for this year. For 2014 and 2015, First Solar expects net sales in the range of $3.5 billion to $4.0 billion and $4.2 billion to $4.8 billion, respectively.

The company expects total module shipments in the range of 1.6 gigawatt (:GW) to 1.8 GW in 2013, 1.8 GW to 2.2 GW in 2014 and 2.3 GW to 2.7 GW in 2015.

Excluding restructuring expense of $10 million, the company expects pro forma earnings per share in the range of $4.00 to $4.50 in 2013. For 2014, it foresees earnings in the range of $2.50 to $4.00 per share, while for 2015 the guidance climbs to $4.00 to 6.00 per share.

For 2013, the company has allocated $350 million to $400 million on capital expenditure. The company stated that the guidance for this year and the next takes into account the revenue recognition from Desert Sunlight, which is scheduled to begin operations in the second half of 2013. The company expects better results in the latter half of the year compared to the first half.

First Solar is eyeing opportunities in other regions including Japan. On Apr 2013, the company intends to acquire TetraSun from JX Nippon Oil & Energy Corporation for an undisclosed amount. We note that JX Nippon is the largest oil company in Japan. Post-acquisition, both the parties intend to produce and market TetraSun products in Japan.

The acquisition is expected to be completed in the second quarter of 2013. It will allow First Solar to expand its footprint in Japan, which is expected to become the second-largest market for solar products in 2013 after China.

Zacks Rank

First Solar presently retains a short-term Zacks Rank #3 (Hold). In the near term, we would advise investors to accumulate its short-term Zacks Rank #2 (Buy) peers ReneSola Ltd. (SOL), STR Holdings, Inc. (STRI) and Trina Solar Limited (TSL).
 

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