First Solar Inc. FSLR reported adjusted second-quarter 2015 earnings of 52 cents a share (after adjusting for a $42 million benefit from discrete tax item), sweeping away the Zacks Consensus Estimate of 7 cents by 643%. In the prior-year quarter, First Solar had generated earnings of 4 cents per share. The improved performance reflects higher systems project revenue as well as project cost improvements after the largest solar-panel manufacturer of the nation recovered from its first-quarter loss in years.
Revenue
First Solar’s revenues in the quarter increased 64.6% year over year to $896.2 million. With this, the top line surpassed the Zacks Consensus Estimate of $746 million by 20.1%. The upside is attributed to higher revenue recognition on the Silver State South project and the sale of majority interests in the North Star and Lost Hills-Blackwell projects.
The company exited the quarter with 537 megawatt (“MW”) Dc of bookings, bringing the year-to-date figure to 1.4 Gigawatt (“GW”).
Operational Highlights
Gross profit in the reported quarter was $164.5 million, up a significant 77.4% from $92.7 million a year ago.
Total operating expenses rose 18.2% to $107.4 million, largely due to higher selling, general, and administrative expenses along with an additional start-up cost of $6.9 million.
Operating income was $57.1 million, up considerably from $1.9 million a year ago.
Financial Performance
First Solar had $1,075.9 million of cash and cash equivalents as of Jun 30, 2015, down from $1,482.1 million at year-end 2014. Long-term debt was $257.8 million at the end of the second quarter 2015 compared with $165 million as of Dec 31, 2014.
Forming a YieldCo
In the reported quarter, First Solar launched a Yield Co called 8Point3 Energy Partners LP CAFD in partnership with SunPower Corporation SPWR. Yield Co’s possess completed renewable energy projects that have long-term power-purchase agreements in place to deliver dividends to investors. These are designed to provide a dependable stream of cash flow.
2015 Guidance
The company expects to ship 2.8−2.9 GW of panels this year, up from an April forecast of 2.6−2.8 GW this year.
Full-year revenues are expected in the band of $3.5 billion to $3.6 billion and earnings in the range of $3.30 to $3.60 a share.
At the Peer
SunPower reported second-quarter 2015 adjusted earnings per share of 9 cents, lagging the Zacks Consensus Estimate of 14 cents by 35.7%. Reported earnings also plunged 55% from the year-ago quarter.
Upcoming Release
Canadian Solar Inc. CSIQ is scheduled to release second-quarter results on Aug 18.
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 other solar majors, Canadian Solar and SunPower, 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.
In the competitive solar landscape, First Solar is evidently focused on research and development. In Jun 2015, it set a world record for cadmium-telluride (CdTe) photovoltaic (PV) module conversion efficiency, achieving 18.6% aperture efficiency for an advanced full size module. To put it simply, their solar module has increased the amount of sunlight converted into electricity at the highest recorded efficiently rate. During the company’s first quarter, First Solar’s best modules had maintained an average efficiency of 16.3%. The record has been measured and certified by the U.S. Department of Energy’s National Renewable Energy Laboratory.
First Solar presently has a Zacks Rank #5 (Strong Sell).
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