by Aaron Levitt | October 29, 2013 11:12 am
Given its impressive stock performance this year — up almost 70% — there’s a lot riding on First Solar’s (FSLR) latest earnings report. Solar stocks have seen a renewed renaissance over the last few months as new subsidies in China, Japan and other emerging markets have spurred adoption and increases in new utility-scale installations.
As one of the industry leaders — along with SunPower (SPWR) — FSLR has experienced much of investors’ renewed euphoria for solar stocks. And given that position, First Solar’s earnings are a critical gauge of just where the sector could be heading in the new year.
So with FSLR about to report on Oct. 31, the question is now whether the solar stock will electrify the markets with its profits or just fade away like the setting sun. Here’s what to expect from First Solar in the third quarter.
Investors may want to put on sunscreen when FSLR reports earnings in a few days, because the solar stock has topped the Street’s estimates twice in the past four quarters. That could continue for its latest earnings release as First Solar is building on the back of several strong deals during the last three months — with it systems business leading the way.
First, FSLR recently purchased of all of General Electric’s (GE) cadmium telluride solar intellectual property, while creating a technology collaboration agreement with the industrial stalwart. The basic idea was to help advance thin-film solar cells and modules, while using GE’s impressive distribution network. GE received roughly 1.75 million shares of the solar stock and should help First Solar get its panels into the hands of more industrial and utility clients.
Despite recently selling a facility in Mesa, Ariz., FSLR’s systems business has been gearing up as well. The solar stock signed a deal with NextEra Energy (NEE) to construct a 250-megawatt plant in California, in addition to buying a 1.5 GW portfolio of development assets in U.S. and Mexico from Element Power. Execs at FSLR have been pursuing several new booking opportunities totaling around 8 GW worth of construction.
The key for many of those projects lies outside of North America. The solar stock has been expanding its systems business into international markets — especially Latin America. First Solar’s recent purchase of a PV developer in Chile will be a longer-term catalyst, as will its deals in Brazil. Meanwhile, FSLR is ramping up sales in both Japan and China. The recent purchase of Japan’s TetraSun will have FSLR selling high efficiency silicon panels in the power-strapped nation.
Overall, these deals should shine plenty of sun on FSLR earnings going forward.
Given the positives, the solar stock could see better-than-expected numbers during the third quarter’s earnings.
Overall, FSLR is predicted to earn 95 cents per share, according to analysts polled by Thomson Reuters. Meanwhile, Frist Solar’s quarterly revenue is expected to rise to $980.67 million. That’s a 16.9% jump from the $839.15 million earned in the same quarter last year.
Perhaps, the biggest boost for FSLR will come from its full-year estimates. With only two months left, the solar stock should be able to predict the fourth quarter’s numbers as well as its full-year estimates. Given the positive tailwinds, First Solar should be able to update guidance of $3.50 to $4.00 per share in earnings for the full year, which should send shares higher.
Currently, FSLR shares trade for just 13.66 times earnings and are still about $7 below its 52-week high. That could be a great buying opportunity if earnings turn out as good as expected.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.
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