First Solar Inc. (FSLR) surpassed the Zacks Consensus earnings per share (EPS) estimate of $1.49 by 16 cents to reach $1.65 in the fourth quarter of fiscal 2009. It also beat the year-ago quarterly EPS figure of $1.61 by 4 cents.
The upbeat trend was reflected in fiscal 2009 results as well, where an EPS of $7.53 exceeded the Zacks Consensus Estimate of $7.34 and almost doubled, compared to the fiscal 2008 EPS of $4.24.
Earnings Revisions Trend
Out of the 31 analysts covering the stock, 5 and 2 have revised their estimates downward for fiscal 2010 in the last 30 and 7 days, respectively. The fiscal 2010 Zacks Consensus EPS estimate is presently at $6.45. This is in line with the company’s EPS projection of $6.05 to $6.85.
The company has provided positive surprises over the last 4 quarters. First Solar has beaten the Zacks Consensus Estimate by 22.4% on average over that time period. Although reported earnings were upbeat, we are cautious over the near-term performance of the company.
First Solar’s growth story will continue with its utility-based order backlog and strong balance sheet. The company has focused on capacity build-outs, technological enhancements and cost minimization, and enjoys a technological superiority over its silicon-based solar peers. However, a volatile Euro, declining German subsidies and a modules oversupply situation in the market may partially hamper short-term growth. This justifies our Neutral recommendation for the stock (Zacks #3 Rank).
Operational Performance
First Solar’s quarterly revenues were $641.3 million, up from $480.9 million in the third quarter of fiscal 2009 and up from $433.7 million in the fourth quarter of fiscal 2008. Revenues for fiscal 2009 were $2.1 billion, up from $1.2 billion in fiscal 2008.
First Solar produced 311 MW during the reported quarter, up 6.4% compared to the prior quarter. Cost per watt produced for the fourth quarter was $0.84, down $0.01, and benefited from lower material costs, higher throughput and conversion efficiency, which was partially offset by $0.02 for the Ohio plant’s production ramp and $0.01 of unfavorable foreign exchange impact.
Manufacturing costs declined 3.6% to $0.80 per watt quarter-over-quarter. Gross margin for the fourth quarter was 41.5% points, down 9.4% points over the prior quarter.
Financial Performance
First Solar reported $395 million of free cash flow in fiscal 2009. The company reported $664.5 million of cash and cash equivalents at the end of fiscal 2009 from $716.2 million at fiscal-end 2008. Long term debt reduced to $146.4 million at fiscal-end 2009, compared to $163.5 million at fiscal-end 2008. Also the company was able to improve upon its debt-to-equity ratio to 7% from 8% at the end of the third quarter of fiscal 2009.
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