First Solar Q2 Preview: Will The Module Business See Some Improvement?
First Solar (NASDAQ:FSLR), the largest U.S. solar equipment manufacturer, is expected to publish its Q2 2017 earnings on July 27, reporting on what is likely to have been an interesting quarter for the solar industry amid some price stabilization for solar panels. In this note, we take a look at some of the key factors to watch as the company reports earnings.
We have a $45 price estimate for First Solar, which is roughly in line with the current market price.
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While 2017 was projected to be a mixed year for the solar market, amid manufacturing capacity growth as well as projected demand declines in some major markets, there have been some positive developments in recent months. For instance, Chinese demand is being propped up by the recent extension of some feed-in tariffs, while demand from the U.S. has been supported by project developers placing advance orders to hedge against some demands to set a price floor on solar imports to the U.S. That said, First Solar’s modules sales could face some pressure, as the firm’s current generation Series 4 modules are less competitive compared to c-Si panels, given their lower rated power outputs and the sharp decline in the price of competing silicon based panels. While the company expects to start and ramp up production of its next-generation Series 6 modules from mid-2018, it will have to offload its remaining Series 4 production. As of May 2, 2017, the firm noted that it had 1.7 GW to 1.9 GW of Series 4 capacity to be sold (see: Will First Solar’s Series 6 Gamble Pay Off?).
For this quarter, the results of First Solar’s project division could be driven by the sale of the 179 MW Switch Station 1 and 2 solar projects, which are under construction in Nevada, to EDF Renewable Energy. Project related gross margins may also see a sequential improvement, as the Moapa project, which the firm sold during Q1, had significantly lower margins compared to its typical utility-scale projects.
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