Monday, October 19, 2009

First Solar Inc. (NASDAQ: FSLR): Third Quarter Earnings Preview 2009

First Solar Inc. (NASDAQ: FSLR) is scheduled to report third-quarter financial results on Wednesday, October 28, 2009. Analysts, on average, currently expect the company to report earnings of $1.70 a share on revenue of $525 million. In the year ago quarter, the company reported earnings of $1.20 per share on revenue of $349 million.

First Solar, Inc. engages in the design, manufacture, and sale of solar electric power modules using a proprietary thin film semiconductor technology.

The Tempe, Arizona-based company's net income for the second quarter surged to $180.60 million or $2.11 per share from $69.70 million or $0.85 per share in the prior-year quarter. Revenue at the solar-power-modules manufacturer almost doubled to $525.9 million. Analysts, on average, expected the company to earn $1.62 per share on revenue of of $459.12 million. Efficiency was 10.9% on average, that is up slightly over the prior quarter. The company's annualized capacity per line increased to 51.7 megawatts, up 5% quarter over quarter. Operationally, production was 290 megawatts, that is up 32% quarter over quarter. In July, the company also reaffirmed its FY09 net sales guidance range of $1.9 billion to $2 billion. First Solar broke the $1 per watt manufacturing cost barrier in 2008. During the second quarter, the cost per watt was down to 87 cents.

The rapidly growing solar panel maker has recently been placed on the S&P 500.It is the first pure-play renewable energy company to be added to the index.

The nascent industry has been hit hard by the turmoil in the credit market as financial players abandoned U.S. solar energy projects last year. The 2008 collapse of top solar financier Lehman Brothers and the freeze-up in the global credit markets drove nearly all banks to halt funding for major new solar projects, forcing the makers of systems that turn sunlight into electricity to slash prices for their products and sending their stocks crashing. Globally, solar industry depends upon government subsidies and incentives. However, recent developments suggest that subsidies will inevitably be reduced or phased out. Generous federal subsidies in key European markets like Germany and Spain ensured high electricity rates for solar energy system. In June, German legislators voted for steeper cuts to subsidized prices for electricity generated from solar panels. Last year the guaranteed price paid for solar-produced electricity was reduced by 5 percent. Some lawmakers had demanded a cut of as much as 30 percent in the subsidized rate. Spain too has taken similar steps. It is important to note that First Solar derives a significant percentage of its revenues from a small core group of customers primarily within Europe, and specifically, Germany. International operations accounted for 95% of net sales in 2008 and 98.8% in 2007. 74% of sales in 2008 resulted from solar module sales in Germany.

However, First Solar has been bagging projects in other important markets, making up for the loss in European markets. The company recently signed a memorandum of understanding with the Chinese government to build a 2 gigawatt solar power plant in Ordos City, Inner Mongolia, China. First Solar announced in August it will build a 550-megawatt solar power generation facility for Southern California Edison, a unit of Edison International by the end of 2015. California has aggressively pursued energy efficiency. Recently, California Governor Arnold Schwarzenegger approved a new subsidy for solar power. California's abundant sunshine, relatively high utility rates and solar subsidies have already made the state one of the world's top solar markets.

In terms of stock performance, First Solar shares are down 4% since the beginning of the year.

Disclosure: Author doesn’t own any of the stocks discussed here.

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