First Solar's Earnings May Show Dimming Future

First Solar saw sales and earnings fall short of expectations, which is problematic as the company falls behind competitors in efficiency.

Feb 25, 2014 at 6:00PM

First Solar (NASDAQ:FSLR) released fourth-quarter earnings after the market closed today and managed to fall short of the expectations both Wall Street and its own management set. Revenue was $768 million in the quarter and $3.3 billion for the full year but came in below the $3.4 to $3.6 billion estimate given just three months ago.  

The bottom line was a little better, and non-GAAP earnings per share of $0.89 in the fourth quarter and $4.35 for the full year were in the middle of management's expected range, but the quarter fell a full $0.10 short of expectations.

The other bad news is that expected revenue from projects fell from $8.0 billion a year ago to $7.5 billion to end 2013. This is essentially backlog of projects and despite booking 100 MW more in projects than it completed during the year the total backlog in dollars dropped. The falling cost of solar is great for long-term demand because it makes the energy source competitive with the grid, but it also pressures margins, which is hurting First Solar right now.

Missing expectations you set for yourself is one thing, but First Solar is also highlighting strategic challenges it's facing in solar. As overall costs fall, efficiency becomes more important in the overall cost per kW-hr equation and that's where First Solar is behind competitors. That's evident in the decline in margins and net income this quarter, which is why shares are selling off after hours.

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