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First Solar Shines on Q4 Earnings Beat; Cuts Sales View

Zacks Equity Research

First Solar Inc. FSLR reported fourth-quarter 2015 earnings of $1.60 a share, sweeping away the Zacks Consensus Estimate of 80 cents by 100%. However, the reported number decreased 15.8% from prior-year earnings of $1.90 per share. The decrease reflects lower sales, gross margins and operating income.

Shares of First Solar traded up 2.86% after-hours following its earnings release.

In 2015, earnings came in at $5.37 per share, up 37.7% from $3.90 per share a year ago.
 

First Solar Inc. (FSLR) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Revenues

First Solar’s revenues in the quarter decreased 6.5% year over year to $942.3 million. The top line, however, surpassed the Zacks Consensus Estimate of $931 million by 1.2%. The decline is primarily attributed to lower revenues from the Desert Stateline project and sales of third party module and module plus offerings.

In 2015, the company generated $3,579 million of revenues, up 5.5% year over year.

The company exited 2015 with record bookings of 3.4 Gigawatt (“GW”) Dc.

Quarterly Operational Highlights

Gross profit in the reported quarter was $231.4 million, down 25% from $308.4 million a year ago.

Total operating expenses declined 8.7% to $99.6 million, largely due to lower selling, general, and administrative expenses along with the absence of production start-up costs during the fourth quarter 2015. This was partly offset by higher research and development expenses.

Operating income was $131.8 million, down from $199.2 million a year ago.

Financial Performance

First Solar had $1,126.8 million of cash and cash equivalents as of Dec 31, 2015, down from $1,482.1 million at year-end 2014. Long-term debt was $251.3 million at the end of 2015 compared with $162.1 million as of Dec 31, 2014.

2016 Guidance

First Solar reduced its revenue guidance for 2016 to $3.8–$4 billion (from $3.9–$4.1 billion earlier) and narrowed the gross margin estimate to 17–18% (from 16–18%) while keeping its operating income guidance unchanged at $260–$330 million. The company also lowered its operating cash flow guidance to $400–$600 million from $500–$700 million expected earlier.

The company reiterated its panel shipment projection at 2.9−3.0 GW for 2016.

Full-year earnings are still expected in the band of $4.00−$4.50 per share.

At the Peers

SunPower Corp. SPWR reported fourth-quarter 2015 adjusted earnings per share of $1.73, beating the Zacks Consensus Estimate of $1.44 by 20.1%. Reported earnings also surged 917.6% from the year-ago figure of 17 cents.

SolarCity Corp. SCTY posted a wider loss in the fourth quarter of 2015. The company reported an adjusted loss of $2.37 per share, much wider than the year-ago loss of $1.33 per share. Loss widened due to the company’s rising expenses. However, quarterly loss was narrower than the Zacks Consensus Estimate of a loss of $2.57.

8point3 Energy Partners LP CAFD, which began trading on Jun 19, 2015, reported a loss of $8.6 million for the fourth quarter of fiscal 2015 (ending Nov 30, 2015), much wider than the prior-year loss of $2.2 million.

Our Take

Tempe, AZ-based First Solar is steadily expanding its global footprint. The company primarily caters to the North American market but is also keen on grabbing a larger market share. Like the other solar majors, the company is looking to expand its operations in the Middle East, India, Japan, Australia and South America. Expansion into other geographies would lead to both top-line and margin growth.

The company reported a lower profit in the fourth quarter as it continued to invest in new projects while holding off on selling other ones. The company has changed its strategy last year and holds certain power plants on its portfolio to sell them to a joint venture it formed with SunPower Corp. − 8point3 Energy Partners LP.

However, as per Chief Executive Officer Jim Hughes, demand for its power plants is growing since the U.S. extended tax credits in Dec 2015. First Solar currently has a pipeline of projects with capacity of as much as 20.3 GW, up 17% from the third quarter of 2015.

Zacks Rank

First Solar presently carries a Zacks Rank #2 (Buy).

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FIRST SOLAR INC (FSLR): Free Stock Analysis Report
 
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8POINT3 ENERGY (CAFD): Free Stock Analysis Report
 
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