First Solar Plays 3-card Monte (FSLR, GE)

Prior to its earnings release after markets close today, First Solar, Inc. (NASDAQ: FSLR) has issued two press releases touting the current and future performance of its thin-film cells and modules. Neither will have any impact on last quarter’s earnings, and may have only a marginal impact on future earnings. But, the company’s thinking must go, at least the news may deflect some of the heat First Solar will feel after its earnings release.

Three months ago analysts expected First Solar’s second quarter EPS to come in at $2.01. That estimate is now $0.92. Even if the company beats expectations, the results will be disappointing. So First Solar found some good news to report.

The smaller bit of news is that the company’s cadmium-telluride (CdTe) thin-film modules have been certified as able to withstand the corrosive effects of salty air close to coastlines. This means that First Solar’s modules can be used in a rather nasty environment and that the company’s 25-year guarantee actually means something.

The second bit of news is more interesting, if somewhat longer term in applicability. The company has announced that it has set a new record for CdTe thin-film efficiency of 17.3%. That is, the solar PV cell converts 17.3% of the sunlight that hits it to electricity. This is 0.6% better than the previous efficiency record, which was set 10 years ago. In technology circles, 10 years is about 3 lifetimes.

While First Solar’s achievement is certainly praiseworthy, production of the high-efficiency cells remains well into the future. Currently the company is shipping modules with efficiencies of 11.7%. (Modules, unfortunately, are not as efficient as single cells.) By the end of 2014, First Solar expects to be shipping modules with an efficiency of 13.5%-14.5%.

Compared with crystalline silicon solar PV modules, the efficiency is not as high, but the cost/watt more than makes up the difference. Current modules prices are right around $0.75/watt, the lowest in the entire solar PV industry. If the company can get the higher efficiency cells out at that price, that will be a significant achievement.

General Electric Co. (NYSE: GE) claims to have produced a CdTe module in its laboratories with an efficiency of 12.8% and that it will begin mass producing modules with these high efficiency ratings in 2013. That’s a bit lower than First Solar’s projected efficiency, but the timeline is more aggressive. If GE can make good on its promise First Solar will have some real competition in the thin-film solar PV space.

None of this is likely to sway investors much if First Solar’s earnings are not gargantuan. At around mid-day, shares are trading down about -2%, at $117.89, within a 52-week range of $111.40-$175.45. Any kind of miss or near-miss on expectations could push shares closer to the low end of that range.

Paul Ausick