First Solar’s EBITDA estimates
First Solar’s (FSLR) adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for 3Q15 came in at $466 million. Its EBITDA margin came in at 36.6%. For 3Q16, analysts expect First Solar’s adjusted EBITDA to be around $120 million and its EBITDA margin to be around 12.3%. A lower EBITDA implies lower income from the company’s ongoing operations.
The expected decrease in margins is mainly due to an anticipated decrease in the company’s revenue mix from its Systems segment on a year-over-year basis. The charges associated with company’s EPC (Engineering, Procurement, and Construction) and Skytron restructuring could have a negative impact on its margins in 3Q16.
Moving ahead, analysts expect First Solar’s margins to improve from 2H17. It’s in line with the company’s focus on shifting its Series-4 product line towards relatively more efficient and cost competitive Series -5 product technology.
Adjusted net income
For 3Q15, First Solar’s adjusted net income came in at about $351 million. For 3Q16, analysts expect First Solar’s adjusted net income to be around $79 million. Also, analysts expect First Solar’s EPS (earning per share) to be around $0.75—compared to $3.43 in 3Q15.
Moving ahead, analysts anticipate higher net adjusted income in 4Q16—compared to 3Q16. It’s primarily due to the expected recognition of revenue from the sale of First Solar’s Moapa asset, the California Flats assets, and the remaining interest in the company’s Stateline asset.
In the long term, upstream solar (TAN) companies’ bottom lines such as First Solar, SunEdison (SUNEQ), SunPower (SPWR), Trina Solar (TSL), and Canadian Solar (CSIQ) largely depend on fossil fuel prices and environmental regulations.
In the next two parts, we’ll take a look at the factors that investors should look for in First Solar’s 3Q16 earnings.