First Solar Mixed Guidance, Great Reception (FSLR)

First Solar Inc. (NASDAQ: FSLR) has laid out its 2010 financial guidance, and it announced plans to add eight production lines at its manufacturing center in Kulim, Malaysia starting production in first half of 2011.   The company gave 2010 sales of $2.7 billion to $2.9 billion, on earnings of $6.05 to $6.85 EPS. Thomson Reuters has estimates pegged at $6.55 EPS and $2.4 billion in revenues, which compares to 2009 estimates of $7.32 EPS and $2.00 billion in revenues.  This guidance can be argued both ways because higher sales and in-line revenues means lower-than-expected margins, but traders are receiving it with open arms so far.

The solar leader also plans to invest $365 million of capital to add two production plants with four manufacturing lines each, which should increase annual capacity by 424 megawatts based upon the third quarter’s annual run rate of 53 MW.

Also noted was that free cash flow targets would be set between $180 and $290 million with operating cash flow targets of $730 to $790 million.  Consolidated gross margins are expected to be 38% with operating margins at 23-24%, influenced by a mix shift to the systems business, which includes $0.6-0.8 billion of EPC/project development.

Shares are trading up on this sales news even if the guidance on earnings is not as solid.  Also, keep in mind that this came on top of reports that First Solar’s 55 MW project was dropped by a Los Angeles utility.  The stock closed down 1.6% at $136.74 on the day, yet shares are higher at $143.75 in the after-hours session.  Margin compression is something analysts and investors alike have started growing accustomed to in solar stocks.

JON C. OGG