First Solar on the Right Track

First Solar Inc. (FSLR - Analyst Report) swept past Zacks Consensus earning per share (EPS) estimate of $1.73 by 6 cents to $1.79 in the third quarter of fiscal 2009. However, it rose 59 cents over the year-ago figure of $1.20 in the third quarter of fiscal 2008.

First Solar’s revenues rose to $480.9 million in the reported quarter from $348.7 million in the year-ago quarter. However it came a cropper when compared to the previous quarter revenue of $525.9 million. The downside was due to increased module shipments to Sarnia project, the reduction in pricing driven by the rebate program and the lower blend of foreign exchange rate of approximately $11 million.

Gross margin in the reported quarter fell 5.8 percentage points from the prior quarter to 50.9%. The downside was mainly due to rebates allowed to customers, a change in customer mix and foreign exchange rates. Net income for the reported quarter fell to $153.3 million from $180.6 million in the previous quarter and up from $99.3 million in the year-ago quarter.

First Solar reported $179 million in cash from operating activities in the reported quarter, besides free cash flow of $114 million. The company reported $364.8 million of cash and cash equivalents at the end of the reported quarter from $716.2 million at year-end fiscal 2008. Long term debt remained unchanged at slightly above $163 million as compared to year-end fiscal 2008. However the company was able to improve upon its debt-to-equity ratio from 10% to 8%.

First Solar now expects its revenue for fiscal 2009 to be in the upper end of the range of the guidance range of $1.975 billion – $2.025 billion. We maintain our market Neutral recommendation on the shares.