A leading provider of large, utility-scale solar power systems, First Solar Inc. (FSLR) posted weak fourth quarter 2013 results due to lower revenues, specifically systems business project revenues. The company’s adjusted fourth quarter earnings of 89 cents per share were below the Zacks Consensus Estimate of $1.00. Quarterly earnings were also down 79.5% from the year-ago profit of $2.04 per share by more than 56%.
Including an asset impairment charge of 25 cents per share related to the recently announced agreement to sell the facility in Mesa, Ariz., GAAP earnings came in at 64 cents per share, down from $1.74 in the prior-year quarter. In Oct 2013, the company had entered into an agreement to sell its Mesa facility.
Full year 2013 adjusted earnings came in at $4.35 per share, missing the Zacks Consensus Estimate of $4.42 by 1.6%. Earnings were also down 11.2% from $4.90 in 2012. On a GAAP basis, 2013 earnings per share were $3.70 (including restructuring and an asset impairment charge of 66 cents per share) compared with a loss of $1.11 in 2012.
Revenue
First Solar’s revenues for the quarter dropped 28.5% year over year to $768.4 million. The top-line figure fell short of the Zacks Consensus Estimate of $974.0 million by 21.1%. The significant year-over-year decrease was mainly due to lower revenue generation from its solar projects business. The tepid solar revenue during the quarter was because of the timing of revenue recognition from its 550-megawatt (MW) Desert Sunlight project in California. This project had boosted third quarter 2013 earnings noticeably.
Again, First Solar sold solar projects in Ontario, Canada to an investment partnership led by GE Energy Financial Services during the third quarter. There were also certain projects which did not book revenue in the fourth quarter. These are expected to start to recognize sales in 2014.
Full year total revenue was $3,309.0 million, down 1.8% from $3,368.5 million in 2012. The yearly figure also missed the Zacks Consensus Estimate of $3,530.0 million.
Gross profit in the reported quarter was $189.3 million, down 35.5% year over year.
Total operating expenses decreased 6.1% year over year to $129.0 million during the fourth quarter. Operating income of $60.3 million was significantly down by 64.9% from the year-earlier level.
Financial Performance
First Solar had $1,325.1 million of cash and cash equivalents at the end of 2013, up from $901.3 million at year-end 2012. Long-term debt (including current portion) decreased to $223.3 million from $562.6 million at year-end 2012.
Guidance
For the first quarter of 2014, First Solar expects revenues in the range of $800.0 million to $900.0 million. The Zacks Consensus Estimate for the said quarter is pegged at $854.0 million.
The company’s earnings per share are expected between 50 cents and 60 cents for the first quarter 2014, far below the Zacks Consensus Estimate of 75 cents for the quarter.
At the Peer
SunPower Corp. (SPWR) posted fourth-quarter 2013 adjusted earnings per share of 47 cents, comfortably surpassing the Zacks Consensus Estimate of 28 cents by 67.9%. Earnings in the reported quarter were also up almost 161.1% from the year-ago earnings of 18 cents. The fourth quarter results were backed by strong demand for its unique, cost effective, high efficiency products in utility, commercial and residential projects.
Our Take
During 2013, the company accomplished several key objectives, including additional bookings of approximately 1.7 gigawatts of solar projects and manufacturing cost cuts. Average module manufacturing costs at its main plant were lowered 17% to 53 cents per watt in the fourth quarter of 2013 (excluding underutilization and upgrades) from 64 cents per watt in the fourth quarter of 2012.
First Solar also completed its first utility-scale project in the Middle East and the largest operating solar photovoltaic (PV) plant in the region. The Topaz plant – the biggest U.S. solar farm with over 300 MW in operation – is also expected to be complete this year. Additionally, Desert Sunlight will be completed in 2015. Going forward, these initiatives would continue to strengthen the company’s position and improve year-over-year comparisons.
Although First Solar failed to meet consensus estimates this earnings release, the company is focused on achieving its strategic objectives to ensure future success.
That said, its first quarter guidance came as a huge disappointment for investors, dragging its share price down by 12% in after-hours trading yesterday.
First Solar presently has a Zacks Rank #3 (Hold). In the near term, we would advise investors to accumulate its Zacks Rank #1 (Strong Buy) peers Canadian Solar Inc. (CSIQ) and JinkoSolar Holding Co., Ltd. (JKS).
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