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First Solar (FSLR) Up 0.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
T-Mobile (TMUS) closed the most recent trading day at $74.90, moving +0.6% from the previous trading session.

It has been about a month since the last earnings report for First Solar (FSLR). Shares have added about 0.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is First Solar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

First Solar Misses on Q4 Earnings, Updates '19 View

First Solar reported fourth-quarter 2018 earnings of 49 cents per share, which missed the Zacks Consensus Estimate of 64 cents by 23.1%. The reported figure, however, improved significantly from the prior-year quarter’s loss of $4.14.

For 2018, the company’s earnings of $1.36 per share lagged the Zacks Consensus Estimate of $1.51 by 9.9%. The full-year figure, however, improved significantly from the prior-year’s loss of $1.59.

Sales

First Solar’s sales of $691.2 million in the reported quarter fell short of the Zacks Consensus Estimate of $803.5 million by 14%. Nonetheless, the top line improved a massive 103.8% from the year-ago quarter’s figure of $339.2 million.

For 2018, the company generated sales of $2.24 billion, which missed the Zacks Consensus Estimate of $2.36 billion by 5.1%. The reported figure also plunged 91.7% from the year-ago figure of $2.94 billion.

Operational Highlights

In the fourth quarter, gross profit was $98.3 million, up 58.4% from $62.1 million registered a year ago.

Total operating expenses contracted 10.1% to $87.3 million due to lower selling, general and administrative expenses, production start-up expenses as well as the mitigation of restructuring and asset impairments expenses.

Consequently, operating income amounted to $11 million, reflecting a massive improvement from operating loss of $35.1 million incurred in the year-ago quarter.

Financial Performance

First Solar had $1,403.6 million of cash and cash equivalents as of Dec 31, 2018, down from $2,268.5 million at the end of 2017.

Long-term debt was $461.2 million at the end of 2018 compared with $380.5 million as of Dec 31, 2017.

2019 Guidance

First Solar has updated its 2019 guidance, partially. The company continues to expect earnings per share in the range of $2.25-$2.75 on sales of $3.25-$3.45 billion. However, it lowered the full-year operating expenses projections from $390-$410 million to $375-$395 million and gross margin expectation from 20-21% to 19.5-20.5%.  

Meanwhile, First Solar continues to expect its shipments in the range of 5.4-5.6 Gigawatts.

The Zacks Consensus Estimates for the company’s 2019 earnings and sales are pegged at $2.45 and $3.25 billion, respectively. While the bottom-line estimate is below the midpoint of the company’s guided range, the top-line estimate matches the lower end of the same.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -126.95% due to these changes.

VGM Scores

Currently, First Solar has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

First Solar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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