Solar stocks have been a mixed bag over the last few quarters. Some have flirted with disaster as panel prices continue to drift lower among a glut of cheap modules. Others have been real champions as they’ve sought to diversify themselves away from being pure-panel manufactures.
Well, you can add First Solar (FSLR) to the latter camp.
The latest First Solar earnings report shows exactly why the firm is a solar stalwart. Its focus on larger utility-sized customers continues to rack-up major profits for FSLR stock. And aside from its blowout earnings, First Solar is poised to continue killing it in the years ahead as several ventures and project take shape.
For investors, when it comes to the solar sector, First Solar stock is really the only name you need.
Bang-Up First Solar Earnings
2,225%. That’s a huge number. It’s also the amount that First Solar managed to see it profits rise year-over-year for the second quarter. For the quarter, First Solar earnings came in at $94.5 million or 93 cents per share. This was compared to just $4.5 million or 4 cents per share, a year ago. At the same time, revenue grew at breakneck speeds, a year-over-year rate of 65%.
Needless to say, both of those huge increases managed to trounce analyst expectations for the quarter and send FSLR stock skyward.
The key for FSLR was its diversified business model of not only being a panel producer, but also a builder of turn-key utility-sized solar facilities.
To start with, First Solar managed to improve operational efficiency of its panels to a new world record 18.6%. That’s darn right impressive and it means that while FSLR can charge a premium for its panels, it actually saves utilities on operation costs over the longer term. Customers seem to be buying in. First Solar said its production increased by 26% over last year’s second quarter to reach 563 MW.
On the solar projects front, FSLR managed to sell and realize revenue recognition from three different facilities this quarter. More money funneled in from its massive 2,550 acre Silver State South project. Additionally, First Solar sold controlling stakes in two different projects — its 60 MW North Star and 32-MW Lost Hills-Blackwell Solar farms — to utility Southern Co (SO). Both of these facilities will be operated and maintained by FSLR for a steady stream of fee income.
Still Plenty Of Growth Ahead For FSLR Stock
All in all, increased panel sales and continued completed solar projects sales have helped First Solar outperform the vast bulk of its peers. And it might not be done yet. It continues to rack-up impressive solar project deals — both domestically and abroad.
For the quarter, FSLR saw its total bookings for new utility-scale projects increase by 537 MW. Year-to-date, the solar firm has managed to rack-up projects totaling 1.4 GW. These include new solar firms in India, Latin America and the Middle East. One new project of note, is Dubai’s new mega-solar farm in which First Solar will install over 2.36 million of its modules. The continued bookings and project roll-outs will help FSLR realize revenue and profit gains quarter after quarter…proving that this huge First Solar earnings beat wasn’t a fluke.
But FSLR has another ace up its sleeve with regards to its portfolio of solar projects: its YieldCo 8Point3 Energy (CAFD).
The new joint venture with SunPower (SPWR) holds a variety of spun-off solar plants under long term utility power purchase agreements. 8Point3 Energy will use any excess cash flows to buy more projects from FSLR and SPWR to drop down into itself. It has first crack at roughly 1,400 MW worth of different projects that either in construction or in the planning stages. The benefit for FSLR is that it has a committed buyer of its future plant assets and since it still owns a majority stake in 8Point3, it’ll still get dividends/cash flows from the facilities. It’s a win-win for First Solar earnings into the future.
Given the continued bullishness across its main business line, FSLR expects some pretty hefty earnings in its future. For all of 2015, First Solar expects to make $3.30 to $3.60 per share in profits on $3.5 billion to $3.6 billion in revenue. The prediction includes 16 cents per share for dividends received from 8Point3. That’s a buck more than what Wall Street was predicting. Longer-term, the continued efficiency gains on its panels will help drive utilities towards FSLR. That, in turn, will drive gains in First Solar Stock.
The Bottom Line: FSLR is once again proving why it’s the king of all solar stocks. The earnings beat — in the face of what’s turning out to be a so-so quarter for the sector — was driven by what will power the stock going forward. Those continued power plant build-outs and drop downs into 8Point3 will be FSLR’s swan song for years to come. Investors looking to add solar exposure should look no further than First Solar stock.