Analysts Weigh In On First Solar Following Earnings Release

First Solar FSLR reported stronger-than-expected results for the first quarter of 2014 on Tuesday. Based on this solid performance, the company has increased its financial guidance for the year.

In a press release, CEO Jim Hughes commented, "In the first quarter we demonstrated significant progress towards achieving the financial and operational targets we outlined at our recent Analyst Day. We have also made significant progress in new bookings and continue to execute on our technology road-map."

Q1 2014 Financial Results Summary

• Net sales increased $182 million from the previous quarter to $950 million. The sequential increase was primarily attributed to revenue recognition on the company's Campo Verdo project.
• Fully diluted GAAP EPS was $1.10 for the quarter up from $0.64 in the previous quarter. The primary reasons cited for this increase are: higher net sales, Improved project costs and lower restructuring and asset impairment charges.
• Cash used in operations came in at $318 million and was mainly related to not yet sold construction projects.
• Cash and marketable securities decreased approximately $385 million to $1.4 billion from the last month of the previous quarter.

Revised Guidance vs Prior Guidance

• Gross Margin percentage 17-18, prior 16-18
• Operating income $290-340 million, prior $270-320 million
• Fully diluted EPS $2.40-$2.80, prior $2.20-$2.60
• Operating cash flow $300-$500 million, prior $250-$450 million

Analysts Remarks
Citigroup analysts reiterated a Buy ratingand continued to view the pipeline as "healthy and growing." Furthermore, Citigroup analysts noted First Solar's opportunity set outside North America has reached 6.9 GW.

Deutsche Bank has taken a slightly less enthusiastic position on the company and currently has First Solar rated as a Hold with a $70 price target. In a note released earlier Wednesday, Deutsche Bank analysts wrote, "Although bookings were somewhat light, mgmt remains confident of achieving book-to-bill of greater than 1."

Morgan Stanley released a note rating First Solar as Equal-Weight, but has not yet assigned a price target. The analysts noted that First Solar's revised guidance for EPS and operating cash flows are "highly achievable."

In explaining their rating, the analysts wrote, "We still see headwinds on the horizon for utility-scale solar in the US, given a relatively weak PPA environment. Though we expect significant growth in key markets like Australia, Chile and the Middle East, the markets are small today and unlikely to compensate fully for a decline in volumes in the US in the next 2-3 years."