What to Expect From First Solar Earnings

First Solar Inc. (NASDAQ: FSLR) is scheduled to report its fourth-quarter financial results after the markets close on Tuesday. The consensus estimates from Thomson Reuters call for $0.78 in earnings per share (EPS) on $929.91 million in revenue. In the same period of the previous year, it posted EPS of $1.89 and revenue of $999.25 million.

The trend of lower oil and gas prices actually has created lots of pressure for solar energy panel makers and for other makers of alternative and renewable energy. As a result, analysts have weighed in on the industry.

One report from Janney Capital Markets indicated that First Solar’s 2016 initial guidance actually exceeded its own expectations. The firm also raised its 2016 estimates as a result, and it considers the move down in the stock as unwarranted. The firm recommends to its clients that any pullback should be viewed as an opportunity to own the premier name in the solar industry, already trading at reasonable price levels.

Previously, First Solar announced guidance for its 2016 revenues in the range $3.9 billion to $4.1 billion. Janney was at $3.97 billion, and at the time FactSet indicated the consensus was at $4.032 billion. EPS guidance for 2016 was $4.00 to $4.50. We might expect to see an update in those numbers in this report.

The weakness may be that gross margin guidance of 16% to 18% didn’t meet consensus expectations, due to the planned sale of its minority interest in the Stateline project. The planned Stateline minority sale effectively brought guidance below consensus from the gross margin line down through the operating income line. Janney considers the accounting treatment of the anticipated earnings immaterial from a valuation perspective.

A few other analysts recently weighed in on First Solar prior to the earnings report:

• Baird reiterated an Outperform rating with a $69 price target.
• Deutsche Bank reiterated a Buy rating with an $86 price target.
• Roth Capital Initiated coverage with a Buy rating and an $80 price target.
• Barclays reiterated an Overweight rating and raised its price target to $90.

So far in 2016, First Solar is more or less trading in line with the broad markets, with the stock down 2.7% year to date. However, over the past 52 weeks the stock is up 31%.

Shares of First Solar were trading down 2.5% on Tuesday to $62.64, with a consensus analyst price target of $74.75 and a 52-week trading range of $40.25 to $7.12.

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