Is First Solar's Big Rebound for Real?

Next Monday, First Solar (FSLR 2.15%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

First Solar has been the leader of the solar industry through good times and bad, and the past several years have been extremely bad for the industry on the whole. But lately, First Solar has seen new signs of life, and shareholders have found renewed excitement about the stock. 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 quarterly report.

Stats on First Solar

Source: Yahoo! Finance.

Is it time for First Solar's earnings to shine?
Over the past few months, analysts have had mixed views of First Solar's earnings prospects. They've cut $0.17 per share from their first-quarter estimates, but they've expanded their full-year consensus by $0.26 per share. The stock has soared more than 50% since late January on optimism about the longer-term prospects for the solar giant.

First Solar has remained a powerhouse in the industry because of its leadership in utility-scale solar projects. Those projects make up more than 90% of its overall revenue and are the primary reason why the company is so profitable, despite having technology that has been mediocre at best in relation to its peers. The solar giant's deal late last month with major utility Southern (SO +0.24%) to sell 139 megawatts of generation capacity was not only Southern's largest solar purchase ever but also highlighted First Solar's strength in putting together these large-scale deals.

But First Solar has made some big moves toward boosting its efficiency. Its acquisition of TetraSun last month should help it move into the upper echelon of performance if its claims prove true, although even the most optimistic expectations would still leave rival SunPower (SPWR +0.00%) with a nice efficiency advantage.

Despite hopes that Suntech Power's default would spur further consolidation among Chinese solar manufacturers, China hasn't given up on the industry. Just yesterday, Yingli Green Energy (NYSE: YGE) was able to borrow $165 million from a state-run Chinese bank, showing the willingness of the government to try to keep even some of its weaker players afloat with easy access to capital. Unless China capitulates, First Solar will continue facing the challenge of competitors using unsustainable business practices.

In First Solar's report, watch for any word of whether the company anticipates moving into residential or commercial solar applications. With First Solar's bread-and-butter big projects becoming more difficult to get, the home market is a huge opportunity that the company could tap into for further profits in the future.

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