What happened
First Solar (FSLR -1.39%) reported its fourth-quarter earnings after the market closed Tuesday, and to the chagrin of investors, it failed to meet analysts' revenue expectations. In addition, clouds seemed to hang heavy over its cash flow statement. These factors, combined with the fact that management provided a less-than-shining forecast for 2022, contributed to traders' decisions to sell the stock lower.
As of 10:42 a.m. ET Wednesday, shares of First Solar were down by 12.6%.
So what
First Solar reported $907.3 million on the top line for the fourth quarter, which came up short of analysts' consensus revenue estimate of $917.7 million. While management didn't directly provide commentary about its sales on the conference call, it did address the issues that have challenged the entire solar energy industry, including "supply chain, logistics, cost, and pandemic-related challenges," so investors can infer that these affected First Solar as well.
Image source: Getty Images.
The company's poor cash generation last quarter caused more consternation among investors. Its operating cash flow fell 81.5% year over year, from $186.3 million down to $34.5 million. Free cash flow fared even worse, falling from $97 million in Q4 2020 to negative $160.4 million in the recently completed quarter.
Apparently, management doesn't expect the clouds to dissipate in 2022, guiding for net sales of about $2.5 billion and earnings per share in the range of zero to $0.60 -- a far cry from the revenue of $2.9 billion and diluted EPS of $4.38 that it generated in 2021.
Now what
Investors may be unhappy with First Solar's poor fourth quarter and with its forecast for 2022, but the stock sell-off may have been an overreaction. With new production facilities scheduled to start operations in 2023, investors exiting their positions now may be making a short-sighted error.
