First Solar Inc. (FSLR) surpassed the Zacks Consensus Estimate of $1.60 by 24 cents to reach $1.84 in the second quarter of fiscal 2010. However, it fell short of the year-ago quarterly EPS of $2.11.
Operational Performance
First Solar’s quarterly revenues were $587.9 million, up 12% from $525.9 million in the second quarter of 2009, soundly beating the Zacks Consensus Estimate of $550 million. The upside came from increased production volumes and systems revenue, partially offset by a decline in pricing and lower euro exchange rates. Also compared to the first quarter of 2010, revenue increased $19.9 million, primarily due to increased turnkey system sales.
In the reported quarter, First Solar was able to reduce the PV module manufacturing cost to $0.76 per watt, from $0.81 in the first quarter of 2010. In the reported quarter, operating income fell to $180.5 million from $204 million in the year-ago quarter. The declines were primarily driven by lower module average selling prices and higher operating expenses, which were partially offset by increased module production and lower module cost per watt. Net income in the reported quarter was $159 million, down from the year-ago net income of $180.6 million.
Financial Performance
First Solar reported $510.5 million of cash and cash equivalents at the end of the first half of 2010, down from $664.5 million at year-end 2009. Long-term debt reduced to $114.2 million from $146.4 million at December 2009.
Outlook
First Solar’s growth story will continue with its utility-based order backlog and strong balance sheet. The company focused on capacity build-outs, technological enhancements and cost minimization. It enjoys technological superiority over its silicon-based solar peers.
For fiscal 2010, First Solar reaffirmed net sales in the range of $2.5 billion – $2.6 billion, reflecting reallocation of module capacity from its systems business to meet stronger module demand from its European customers. However the company raised its earnings per share guidance range to $7.00 – $7.40 from the earlier guidance range of $6.80 – $7.30. Total capital spending for the current fiscal year is projected in the range of $575 million – $625 million. The company expects to generate $575 million – $625 million of operating cash flow in fiscal 2010.
We are currently Neutral on this Zacks #3 Rank (‘hold’) stock.
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