First Solar Posts Strong Q2, Increases Full Year Guidance

by Trefis Team
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First Solar
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First Solar (NASDAQ:FSLR), the largest U.S.-based solar panel manufacturer, posted a better than expected set of Q2 2017 earnings, driven by improving demand and some recent price stabilization in the solar module market as well as better price realizations for its solar projects. While revenues declined by 30% sequentially to $623 million, net profits grew to about $52 million, from around $9 million. The company also increased its full-year guidance, projecting revenues of between $3 billion and $3.1 billion, $150 million higher than its prior forecasts, and adjusted earnings per share of between $2 and $2.50, up from the $0.25 to $0.75 that it had forecast previously.

We have a $45 price estimate for First Solar, which is below the current market price.

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First Solar’s panel sales to third parties grew, driven by robust demand from the U.S., where project developers have been placing advance orders to hedge against the Section 201 case that calls for setting a price floor for solar imports into the country. Demand for tier-1 and high-efficiency solar products from China has also been relatively strong. This has led to the firming up of module prices, after some declines in recent quarters. That said, First Solar’s module gross margins declined to 17% in Q2 versus 26% in Q1, driven partly by ASP declines from volumes that were booked in prior quarters. First Solar noted that it has booked a total of 1.5 Gigawatt DC in capacity (systems and modules) over the last three months, bringing its total backlog as of July 27 to 3.7 Gigawatt DC. First Solar has also largely cleared out its remaining supply of Series 4 modules (it has just about 0.3 to 0.5 GW Series 4 supply that remains to be booked) as it prepares to transition to its next-gen Series 6 modules from Q2 2018.

First Solar’s project revenues were driven by the sale of the 179 MW Switch Station 1 and 2 solar projects. While project revenues declined sequentially, project margins improved, allowing the company’s overall gross margins to rise to about 18%. Price realizations for solar projects have been improving, particularly in the U.S., as utility companies have been increasing the solar component of their resource mix while corporates are also looking to increase utility-scale solar exposure to hedge their energy costs. First Solar expects to sell its 40 megawatt Cuyama and 280 MW California Flats projects by the end of this year, and the projects will likely see higher prices than the company had originally forecast.

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