Shares in First Solar Inc. (NASDAQ:FSLR) are soaring this morning, following its first quarter earnings report. The PV solar panel maker posted EPS of $2.00, a penny more than a year ago, on revenue of $568 million. Analysts had been expecting EPS of $1.63 and revenue of $541 million.
But the jet-propelled rise is share price is mostly due to the company’s updated EPS guidance. First Solar raised its full-year EPS guidance to $6.80-$7.30, sharply above analysts’ estimates of $6.15. The company does not believe that the coming 17% cut in Germany’s feed-in tariff will have a significant impact on growth because it sees demand growing outside Germany.
Yesterday, First Solar announced that it would acquire privately held NextLight Renewable Power for $285 million, causing First Solar shares to finish a bit lower. But all is forgiven today, and, if anything, NextLight should add some lustre even though the acquisition will cost shareholders -$0.09 or -$0.10 in EPS for the current fiscal year.
Prior to the NextLight acquisition, First Solar had about 1,400 megawatts of PV installation in its contracted pipeline for utility-scale PV projects, more than twice as much as its nearest competitor. That would be NextLight, with about 575 megawatts in its contracted pipeline. Combined the two companies’ project pipeline absolutely dwarfs its next nearest competitor, SunPower Corp. (NASDAQ:SPWRA).
The NextLight acquisition strengthens First Solar in another area — expertise. NextLight brings significant value in engineering, procurement, and construction (EPC) which should be a substantial help to First Solar as it moves further downstream in the solar PV space.
First Solar currently enjoys a cost advantage over competitors SunPower, JA Solar Holdings Co., Ltd. (NASDAQ:JASO), Trina Solar Ltd. (NYSE:TSL), Solarfun Power Holdings Co. Ltd. (SOLF), and Yingli Green Energy Holding Co. Ltd. (NYSE:YGE). Its solar PV modules use no silicon, which has given First Solar a solid cost advantage of PV modules that require silicon wafers.
Thin-film modules currently cost about $1.76/watt in a 130-watt module. A multi-crystalline silicon module retails for about $1.74/watt, and a mono-crystalline silicon module retails for about $2.23/watt. As crystalline silicon prices fall, thin-film starts to lose its attractiveness because it is less efficient in converting sunlight to electricity.
The First Solar-NextLight combination offers a turnkey solution, from EPC thru construction for utility-scale PV installations. And provided First Solar’s sales force can live up to its reputation, the company’s pipeline should stay well-stuffed with projects beyond the current contracts through 2014.
First Solar’s gross margins rose from 41.5% in the first quarter of 2009 to 49.7% this quarter. That’s getting closer to First Solar’s historical gross margins of 56%. That level is probably gone forever, and that’s why depending on lowering manufacturing costs was not a winning strategy and it chose instead to look downstream.
Among its competitors, Trina Solar is not expecting to match its record fourth quarter numbers. SunPower is expecting no better than a break-even quarter, with most of its fiscal year revenue coming in the second half of the year. JA Solar expects to ship more PV cells in the first quarter, but could get hurt by falling prices. Solarfun’s gross margins dropped significantly in the fourth quarter, and questions about inventory and third-party purchases remain for the first quarter. Yingli has to get expenses under control, and the company failed to share in the $11 billion in loans the Chinese government handed out to solar companies earlier in the first quarter.
Today’s report from First Solar has boosted its shares about 16% on 3X normal volumes. The other players are seeing gains from about 2.5%-6%, but those gains are coming two weeks before most report first quarter numbers. They could give all that back, and more, when the numbers come out.
Paul Ausick
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