Reviewing First Solar’s Q1

First Solar (NASDAQ:FSLR), the largest U.S. solar equipment manufacturer, published a mixed set of Q1 2016 results on Wednesday, beating market expectations on earnings although revenues missed estimates amid choppy revenue recognition for its solar projects business. Below we provide some of the key takeaways from the company’s earnings release.

We have a $75 price estimate for First Solar, which is about 20% ahead of the current market price. We will be updating our valuation model to account for the recent earnings release.

See Our Complete Analysis For Trina Solar| Yingli Green Energy |First Solar | SunPower

• Net sales declined on a sequential basis, owing to a delay in revenue recognition for some systems projects and a higher mix of module-only sales to third parties.
• This was partially offset by higher revenues from the Desert Stateline project. First Solar sold an additional 15% of the Stateline project to Southern Power under an amendment to the original sales agreement. This leaves First Solar with a  34% interest in the project, which will be dropped down into its yieldco this year.
• Gross margins saw solid improvement, amid a higher mix of revenue from the high-margin Stateline project and lower systems and per-watt module costs. However, margins are expected to be lower for the rest of the year. ^[1]

• Year-to-date bookings stood at 0.6 GW. However, the expected revenue added by the recent bookings was low ($300 million), likely because the largest contract for the quarter came from a module supply agreement (200 MW+).

• Potential booking opportunities also expanded by about 3 GW sequentially, driven by international business and extension of U.S. solar investment tax credit.

• The company continues to operate at 100% capacity utilization. First Solar is being slightly circumspect with regards to near-term capacity expansion, although it plans to expand to about 5 GW by 2019. The company had a nameplate capacity of about 2.7 GW at the end of last year.

• Average fleet conversion efficiency improvements remained solid, rising by 10 bps sequentially and 150 bps year-over-year. That said, First Solar’s best line efficiency remained stable as it focuses on rolling out new technologies across all its production lines.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

1. First Solar’s (FSLR) CEO James Alton Hughes on Q1 2016 Results – Earnings Call Transcript, Seeking Alpha, April 2016 [↩]