Updated Research Report on First Solar - Analyst Blog

On Mar 10, 2014, we issued an updated research report on First Solar Inc. FSLR. The largest U.S. solar panel manufacturer recently reported weak fourth quarter 2013 results due to lower revenues, specifically systems business project revenues.

This solar behemoth ported fourth quarter earnings of 89 cents per share, which missed the Zacks Consensus Estimate by 11% and came in 56.4% lower than the year-ago earnings. Revenues also dropped 29% year over year and fell short of the Zacks Consensus Estimate by 21.1%. Lower business project revenue was the primary reason for this huge miss.

First Solar also came up with a weak first quarter 2014 guidance. For the said quarter, it expects revenues in the range of $800.0 million to $900.0 million. Earnings per share are expected between 50 cents and 60 cents for the first quarter 2014, down from the sequentially preceding quarter.

First Solar's numbers look particularly pale in contrast to other solar peers especially when this renewable source is breaking out as the most happening thing in energy today after two years of a punishing downturn.

That said, the company accomplished several key objectives during 2013, including additional bookings of approximately 1.7 gigawatts of solar projects and manufacturing cost cuts. Average module manufacturing costs at its main plant dropped 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, the largest operating solar photovoltaic plant in the region. The Topaz plant – the biggest U.S. solar farm with over 300 megawatt 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.

Presently, China, Japan and the U.S are driving demand for solar panels. Solar majors – comprising polysilicon manufacturers and panel makers – active in Asia are expected to gain traction as the industry oversupply position shrinks.

Though First Solar is facing intense competition, it will be able to develop economically sustainable businesses due to its established expertise in other areas of the solar value chain, such as, project development and engineering, procurement and construction capabilities.

Key Picks from the Sector

First Solar currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Zacks Rank #1 (Strong Buy) peer Canadian Solar Inc. CSIQ and Zacks Ranked #2 (Buy) JinkoSolar Holding Co., Ltd. JKS and SolarCity Corp. SCTY.