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What to Watch When First Solar Reports Earnings This Week

By Travis Hoium - Updated Feb 21, 2018 at 7:52AM

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The company's 2018 solar panel production will be in focus.

First Solar, Inc. (FSLR 2.25%) reports fourth-quarter results after the market closes on Thursday, completing a transitional year for the company. Investors will also get some more clarity on the company's capacity expansions for the Series 6 upgrade, which will start producing real results in 2018. 

Here's what investors should be looking for and where there may be some surprises -- good and bad -- in the quarter and in 2018: 

Solar array in front of power lines in a field.

Image source: First Solar.

What to expect

Based on guidance for the full year, fourth-quarter revenue is expected to be $800 million to $900 million, and loss per share will be $0.24 to $0.49 on a GAAP basis. Yes, First Solar expects a loss, due in large part to the fact that it won't be selling highly profitable projects during the quarter, something it relied on early in 2017. 

Shipment guidance is for 848 MW to 948 MW, a big quarter for the manufacturer. We may even see a few shipments of Series 6 solar modules after management presented the first production products in early December. But Series 6 production won't have a serious impact on First Solar until 2018. 

For 2018, early guidance was for $2.3 billion to $2.5 billion in sales, with earnings projected at $1.25 to $1.75 per share. Management should clarify expectations for the year, but given the large percentage of sales that have already been booked, I wouldn't expect a big change in 2018 guidance one way or the other. 

Is capacity expansion on track? 

You can see in the chart below that First Solar has big capacity-expansion plans for the next few years. Investors will want to hear that those plans are on, or ahead of, schedule. 

Chart of First Solar's expected production from 2017 to 2021.

Image source: First Solar investor presentation.

The speed of expansion plans are especially crucial for First Solar because it makes a solar panel that's exempt from solar tariffs in the U.S. There's a limited span of four years to exploit these tariff rules, and any delays could mean the company will forgo tariff-driven sales here

Has the pace of bookings slowed? 

One thing I'll be watching closely is for any comments on the pace and price of bookings now that the Section 201 tariff ruling has come down. Tariffs were set at 30% in Year 1, then declining 500 basis points annually until Year 4, plus 2.5 GW of solar cell imports were allowed tariff-free, which was in some ways lower than many observers were expecting. 

By 2021, when First Solar has more capacity available to be sold, tariffs will be only 15%, and there may be significant module manufacturing in the U.S. by then, meant to exploit the cell import quota. It's possible that customers are less willing to book solar panel sales that far out given the low tariff, and it's possible First Solar won't get the windfall pricing it got in 2017 when developers were paying a premium just to get tariff-free solar panels

Any clarity that management can give on the state of the market will be key for investors. 

Will profits keep pouring in? 

First Solar has been a leader in the solar industry since it was founded, and has been able to generate profits when others haven't. Investors hope that will continue as the company grows production and leverages its research and development expertise. Fourth-quarter earnings will tell a lot about whether the company is on track in 2018 to keep those profits pouring in, long term. 

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