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First Solar Inc. (FSLR - Analyst Report) is expected to release its third quarter 2012 results on October 31, 2012. The Zacks Consensus Estimate for the third quarter of 2012 is $1.10 per share (significant year-over-year decrease of 51.03%) on revenues of $985 million (a year-over-year decrease of 2.09%).

Second-quarter 2012, a Synopsis

First Solar Inc. posted second-quarter 2012 results with pro forma earnings per share of $1.52, outshining the Zacks Consensus Estimate of 89 cents per share and year-ago figure of 70 cents per share. On a reported basis, earnings per share came in at $1.27 compared with a loss of $5.20 per share in the prior quarter and earnings of 70 cents per share in the year-ago quarter.

First Solar’s quarterly revenues were $957 million, up $460 million from the prior quarter and $425 million from the year-ago quarter. Quarterly revenue also surpassed the Zacks Consensus Estimate of $805 million. The significant top-line growth was driven by an increase in the number and size of projects under construction that met revenue recognition criteria during the quarter. The projects include Antelope Valley Solar Ranch 1 in California and Silver State North in Nevada.

Guidance

First Solar increased its sales and earnings guidance for full-year 2012 based on the ongoing cost structure, primarily related to the restructuring initiatives taken by it. The company expects pro forma earnings per share to be in the range of $4.20 to $4.70 versus its previous expectation of $4.00 to $4.50.

First Solar expects sales to be in the range of $3.6 to $3.9 billion versus its prior expectation of $3.5 billion to $3.8 billion. Post completion of the restructuring program, the company expects to achieve 2.6 to 3.0 GW of sales in sustainable markets and return on invested capital in the range of 13% to 17% by 2016.

The company expects module costs to be in the range of 70 cents to 72 cents per watt and production to be in the range of 1.8GW to 1.9GW in full-year 2012.

Zacks Consensus                   

The analysts covered by Zacks expect First Solar to post third-quarter 2012 earnings of $1.10 per share, lower than $2.25 delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between earnings of 39 cents and $1.53 a share.

For 2012, the Zacks Consensus Estimate stood at $4.47 per share, below the prior-year earnings of 6.01 per share. The current Zacks Estimate ranges between $4.08 and $4.75 per share.

Estimate Revisions Trend

Agreement

We see slightly increasing trend for estimates for the third quarter of 2012. Among the 23 estimates, only one estimate moved upward in the last 30 days. However, there was no movement in the opposite direction over the last 30 days.

For full-year 2012, among the 22 estimates, none of the estimates moved in the upward or downward direction for the last 30 days.

The analysts seem to be neutral for third quarter as well as full year 2012.

Magnitude

The Zacks Consensus Estimate for the third quarter 2012 remained static for the last 30 days at $1.10. For full-year 2012, the Zacks Consensus Estimate did not move in the last 30 days and remained at $4.47.

Surprise History

With respect to earnings surprises, First Solar has topped the Zacks Consensus Estimate in only one of the last four quarters in the range of (116.67%) to 70.79%. The average surprise over the last four quarter remained at (20.34%). The earnings beat in June 2012 was the highest at 70.79%.

Our Recommendation

First Solar Inc. designs, manufactures, and sells solar electric power modules using a proprietary thin film semiconductor technology. The company's solar modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity. It sells its products to project developers, system integrators, and operators of renewable energy projects, primarily in Europe, with a distinct focus on Germany. First Solar also focuses on designing and deploying commercial solar projects for utilities.

Like its solar peers Suntech Power Holdings Co. Ltd. and SunPower Corporation (SPWR - Analyst Report), First Solar is currently witnessing an oversupply of photovoltaic products, leading to a steep drop in average selling prices. Also, the current macro scenario does not bode well for the solar industry, which thrives mainly on subsidies and grants. Moreover, we are concerned due to the volatile euro, apprehension over a reduction in German subsidies, falling crystalline silicon prices and the glut of modules in the market.

However, First Solar stands out among the pack due to its stable liquidity position, which is in sharp contrast to its cash-strapped peers. In order to counter the weak trend, the company is focusing more on utility-scale electricity power projects. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

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