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Why Shares of First Solar, Inc. Popped 10% Today

By Travis Hoium – Jul 28, 2017 at 12:25PM

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A big earnings beat has the market seeing more optimistic results in First Solar's future.

What happened 

Shares of First Solar, Inc. (FSLR -1.46%) jumped as much as 10.4% in trading today after the solar manufacturer reported first-quarter earnings. At 11:20 a.m. EDT, the stock had slipped slightly but was up 7.8% on the day. 

So what

Revenue fell 39% from a year ago to $623.3 million, which is primarily due to the fact that First Solar sold fewer solar projects than it did a year ago. What was particularly surprising was the $52.0 million in net income, or $0.64 per share on an adjusted basis, easily surpassing analyst earnings estimates of $0.04 per share. 

Large First Solar installation in the desert.

Image source: Getty Images.

On top of the earnings beat, management increased 2017 revenue guidance by $150 million to a range of $3.0 billion to $3.1 billion and upped earnings-per-share guidance from an estimated loss of $0.30 to a profit of $0.40 to a new range of $1.55 to $2.20 per share in earnings. 

Now what

A number of factors converged to help First Solar's quarter and 2017 guidance. Solar module demand was much stronger than expected and prices actually rose in the second quarter, which is alleviating some of the margin pressure the industry expected this year. But the big impact is the higher-than-expected sale price of solar projects. That's where most of the increase in revenue comes from, and since it doesn't impact costs, the money flows directly to the bottom line, leading to the large increase in earnings guidance. 

The solar industry is clearly reaching a point of continued strong fundamentals, and I think the market will only get better in coming years. First Solar's shares are up today, but this is a stock to hold for years to come. 

Travis Hoium owns shares of First Solar. The Motley Fool recommends First Solar. The Motley Fool has a disclosure policy.

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