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First Solar (FSLR) Down 0.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for First Solar (FSLR). Shares have lost about 0.4% in that time frame, outperforming the S&P 500.

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

First Solar Misses on Q1 Earnings, Ups '19 Sales View

First Solar Inc. incurred a loss of 64 cents per share in first-quarter 2019, wider than the Zacks Consensus Estimate of a loss of 13 cents. The reported figure also deteriorated significantly from the prior-year quarter’s earnings of 78 cents.

Sales

First Solar’s sales of $532 million in the reported quarter missed the Zacks Consensus Estimate of $622 million by 14.5%. The top line also decreased 6.2% from the year-ago quarter’s figure of $567.3 million. The year-over-year decline can be attributed to lower systems project revenues in the United States and Japan.

Operational Highlights

In the first quarter, gross profit totaled $0.1 million, significantly down from $172.8 million registered a year ago. The deterioration was due to First Solar’s higher cost of sales in the quarter under review.

Total operating expenses declined 22.1% to $76.8 million due to lower selling, general and administrative expenses as well as production start-up expenses.

However, the company incurred an operating loss of $76.6million, reflecting a massive deterioration from operating income of $74.2 million in the year-ago quarter. The downside was due to significantly low gross profit.

Financial Performance

First Solar had $1,013.4 million of cash and cash equivalents as of Mar 31, 2019, down from $1,403.6 million as of Dec 31, 2018.

Long-term debt totaled $558.4 million at the end of first quarter compared with $461.2 million as of Dec 31, 2018.

2019 Guidance

First Solar has updated its 2019 guidance, partially. The company continues to expect earnings in the range of $2.25-$2.75 per share. The Zacks Consensus Estimate for 2019 earnings, pegged at $2.48, lies just below the midpoint of the company’s projected range.

On the top-line front, the company has raised its expectation from the earlier range of $3.25-$3.45 billion to $3.5-$3.7 billion band. The Zacks Consensus Estimates for the company’s 2019 sales, pegged at $3.35 billion, lies much below the midpoint of the company’sprojected view.

However, it lowered the full-year operating expenses projections from $375-$395 million to $370-$390 million and gross margin expectation from 19.5-20.5% to 18-9%.   

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

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -92.91% due to these changes.

VGM Scores

At this time, First Solar has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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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