8 Aug

What to Expect from First Solar’s Future Earnings

WRITTEN BY Sheldon Krieger

First Solar’s 2016 guidance

First Solar (FSLR) revised its fiscal 2016 guidance in its latest filings. However, the company maintained its 2016 net sales guidance of $3.8 billion–$4.0 billion.

What to Expect from First Solar’s Future Earnings

For fiscal 2016, the company increased its gross margin guidance to 18.5%–19% from its previous value of 18%–19%. This indicates the lower cost of sales. This is in line with the company’s aim to improve the conversion efficiency of its solar (TAN) modules. First Solar decreased its GAAP (generally accepted accounting principles) operating income guidance from $300 million–$370 million to $205 million–$250 million due to an expected increase in operating expenses from restructuring charges, as we mentioned earlier. However, the company has a non-GAAP operating income guidance of $310 million–$370 million after adjusting for restructuring charges.

Also, the company decreased its GAAP EPS (earning per share) guidance from $4.10–$4.50 to $3.65–$3.90. However, the non-GAAP EPS after adjusting for restructuring charges is expected to be $4.20–$4.50. For fiscal 2016, First Solar maintained its shipments guidance at 2.9 GW–3.0 GW. Now, FirstSolar expects its capital expenditure for 2016 to be $275 million–$325 million compared to its prior guidance of $300 million–$400 million. The decrease is mainly due to a change in the timing of expenditure on company’s Series 5 technology.

Analysts’ expectations

Following its 2Q16 earnings, analysts lowered their EBITDA (earnings before interest, tax, depreciation, and amortization) estimates for First Solar.

What to Expect from First Solar’s Future Earnings

For the upcoming quarter, analysts decreased their EBITDA estimates by 39% from their pre-2Q16 earnings estimates. Analysts expect the company to report EBITDA of ~$101 million—compared to their previous estimate of $166 million. Also, analysts anticipate that the company will post lower EBITDA values moving forward. A lower EBITDA figure implies lower revenue from ongoing operations.

Outlook

In the short term, shifting from the Series 4 to Series 5 cadmium telluride module offering and developing Series 6 technology modules is crucial for First Solar. Also, it is important for the company to meet its project deadlines and bring more of its early-stage projects to the next level. However, in the long term, the bottom line of upstream solar companies such as First Solar, SunEdison (SUNEQ), SunPower (SPWR), Trina Solar, and Canadian Solar (CSIQ) largely depend on fossil fuel prices and environmental regulations.

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