First Solar, Inc. Earnings: What to Expect Tuesday

Will the solar giant miss out on the next hot trend in the solar industry?

Feb 23, 2014 at 5:55PM

First Solar (NASDAQ:FSLR) will release its quarterly report on Tuesday, and investors have had mixed views in how they assess the solar giant's future. Falling costs throughout the industry have led many more people to consider solar installations, but at least for now, First Solar has largely ceded the booming residential-solar market to SolarCity and SunPower (NASDAQ:SPWR), choosing instead to continue focusing on its competitive advantage in meeting utility-scale solar demand.

Success in the solar industry right now is all about growth, and First Solar has made the most of its particular area of specialty in serving big utility customers with massive projects to take maximum advantage of opportunities for solar electricity generation. Yet the company doesn't have that space all to itself, with SunPower and other players looking to get their fair share of such projects as well. The question investors have to answer is whether First Solar can keep its edge while finding enough projects to take full advantage of its production capacity. Let's take an early look at what's been happening with First Solar over the past quarter and what we're likely to see in its report.

Fslr
Source: First Solar.

Stats on First Solar

Analyst EPS Estimate

$0.99

Change From Year-Ago EPS

(51%)

Revenue Estimate

$965.38 million

Change From Year-Ago Revenue

(10.2%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

What's next for First Solar earnings?
Analysts have gotten a bit more optimistic about First Solar earnings in recent months, boosting their fourth-quarter estimates by a penny per share and their full-year 2014 projections by $0.04 per share. The stock has given up ground, though, falling 13% since mid-November.

First Solar's third-quarter earnings report impressed shareholders, with revenue jumping by more than half and net income more than doubling from year-ago levels. Moreover, First Solar increased its earnings guidance for the full year, citing both reductions in production costs and sales of major projects in California and Canada for the surprising results. The company reduced its sales expectations for the full 2013 year, but First Solar expects that to be a timing issue rather than a permanent loss of revenue.

Still, some fear that First Solar is missing out on the boom in residential solar installations and that doing so could cause problems down the road. Yet even though residential solar has soared in popularity, solar costs are now falling to a level at which some utility-scale installations are competitive with fossil-fuel-produced grid electricity, with First Solar having signed an agreement recently to sell electricity in Arizona below the grid price. The fact that SunPower is still trying to be a force in utility solar shows that it's still a potential growth opportunity, and with utilities having to fight back against residential solar, adopting lower-cost solar projects of their own is a natural place to center their efforts.

One fascinating area for growth for First Solar could come from the mining industry. With energy costs on the rise, miners across the world are looking at customized projects to provide power for mining operations. First Solar's presence in Australia gives it a big opportunity to serve miners there, while competitor SunEdison (NYSE:SUNE) expects to complete a 100 megawatt project to serve Chile's CAP and other companies are looking at similar power agreements.

Not everything has gone well for First Solar, though. Last month, Europe chose not to impose tough renewable-energy targets on all of the European Commission's member nations, instead choosing an overall goal. The resulting drop in possible demand hit First Solar and its peers hard, but First Solar has diversified its exposure well beyond Europe and so shouldn't see as big a business impact as some of its more Euro-centric peers.

In the First Solar earnings report, watch to see how the company's integration of its TetraSun purchase last year is faring. With expectations for higher-efficiency cells, First Solar needs to demonstrate that it can expand its scope of business as a result of the deal. If it can, then First Solar could see a new wave of growth as a result.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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