First Solar Inc. (FSLR) reported second quarter 2011 results with earnings per share of 70 cents, considerably below the Zacks Consensus Estimate of 93 cents and the year-ago figure of $1.33 per share. The downside reflects lower average selling prices (‘’ASPs’’) and increased investment in the Utilities Systems business and research and development.
Operational Performance
First Solar’s quarterly revenues were $532.8 million, down from the year-ago revenue of $587.9 million. The top line was hurt by lower average selling prices. ASPs were adversely impacted by solar photovoltaic (‘’PV’’) policy uncertainties in Italy, Germany and France.
The revenue decline also reflects a decrease in revenue recognized by the systems business, partially offset by higher module volume.
First Solar produced 482.9 megawatts of power in the reported quarter, up 40.4% year over year. The company’s total cost per watt produced and core manufacturing costs per watt were a respective 75 cents and 73 cents, both down 1 cent from the prior year period.
Second quarter gross margin was 36.6%, down from 48.3% in the second quarter 2010. Total operating expenses for the quarter rose 25.7% to $130.3 million from the year-ago period. Overall net income came in at $61.1 million, far below the year-ago figure of $159 million.
Financial Performance
First Solar reported $357.5 million of cash and cash equivalents at the end of the reported quarter, down from $510.5 million at the end of second quarter 2010. Long-term debt decreased to $332.5 million from $114.2 million at the end of the prior-year period.
Guidance
The company expects earnings per share in the range of $9.00 to $9.50 for 2011. It expects net sales to be in the range of $3.6–$3.7 billion. Capital expenditure is expected to be in the range of $800 million to $900 million.
Overall, the company anticipates stronger performance in the second half of 2011 driven by projects from its systems pipeline, development of new markets, execution of cost reduction plans and improvement in module efficiencies.
At the Peer
One of the company's competitors, Suntech Power Holdings Co. Ltd. (STP) is expected to release its second quarter results on August 15, 2011. The Zacks Consensus Estimates for second quarter 2011 and fiscal year 2011 are currently at 19 cents per share and 85 cents per share, respectively.
Our Take
First Solar, the largest stand-alone solar module manufacturer in terms of market capitalization, is steadily ramping up capacity. The company is expected to benefit greatly from the steady economic recovery as well as favorable legislations supporting PV installations.
Moreover, with a focus on branching out its revenue base geographically, technological enhancements and cost minimization, the company is adding a distinct edge over its competitors.
However, its short-term growth may be partially hampered by the volatile euro, apprehension over reduction in German subsidies, falling crystalline silicon prices and the modules’ oversupply situation in the market. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
First Solar is headquartered in Phoenix, Arizona. It designs, manufactures, and sells solar electric power modules using a proprietary thin film semiconductor technology. The company’s solar modules manufacturing facilities are located in Perrysburg, Ohio in the US, Frankfurt (Oder) in Germany and at Kulim in Malaysia. The company also has a research and development facility located at its Perrysburg, Ohio manufacturing facility.
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