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First Solar Inc. (FSLR - Analyst Report) comfortably beat the Zacks Consensus earnings per share (EPS) estimate of $1.75 by 29 cents to clock adjusted earnings of $2.04 in the fourth quarter of 2012. It also surpassed the year-ago quarterly EPS of $1.26.

On a reported basis EPS came in at $1.74 per share in the fourth quarter of 2012 versus a loss of $4.78 per share in the year-ago quarter.

Full year 2012 adjusted EPS came in at $4.90, above the Zacks Consensus Estimate of $4.59 but behind the full year 2011 earnings of $5.54. On a reported basis, loss came in at $1.11 in 2012 versus 46 cents loss in 2011.

Operational Performance

First Solar’s quarterly revenues were $1.08 billion, up from $660.35 million in the fourth quarter of 2011. The increase in net sales was primarily due to increased revenue recognition for the Topaz project, and an increase in third-party module sales. Quarterly revenue, however, fell behind the Zacks Consensus Estimate of $1.32 billion.

Full year 2012 revenue rose to $3.37 billion from $2.77 billion year over year. However, this came in below the Zacks Consensus Estimate of $3.62 billion.

In recent times, First Solar has been struggling as solar panel prices continue to decline due to oversupply and weak demand. Meanwhile, the company has turned its focus on building solar farms on its own rather than selling solar panels to other companies.

Gross margin in the fourth quarter was 27.3%, down from 28.4% in the prior quarter. The gross margin decline is primarily reflective of a less favorable mix of projects margins. The write-down of certain refurbished module inventory during the reported quarter was also a factor. The total margin decrease was partially offset by a credit related to lower estimated future collection and recycling cost.

Overall, First Solar reported that its fourth quarter of 2012 net income was $154.18 million, compared with a net loss of $413.11 million in the same quarter last year.

Financial Performance

First Solar reported $901.29 million of cash and cash equivalents at the end of 2012, up from $605.62 million at year-end 2011. Long-term debt increased to $500.22 million from $619.14 million at year-end 2011.

Guidance

Looking forward to the first quarter of 2013, the company forecast net sales of $650 to $750 million and earnings of $0.70 to $0.90 per share.

Outlook

Based in Phoenix, Ariz., First Solar 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.

First Solar is the only stand-alone solar player in the S&P 500 Index. Along with its solar peers, the company is witnessing an oversupply of photovoltaic products leading to a steep drop in ASPs. First Solar Holdings currently has a Zacks Rank #3 (Hold).

Also, the current macro scenario does not bode well for the solar industry, which thrives mainly on subsidies and grants. As a result, solar operators like Canadian Solar Inc. (CSIQ - Analyst Report), JinkoSolar Holding Co., Ltd. (JKS - Snapshot Report), and SolarCity Corporation (SCTY - Snapshot Report), we fear would face bleak fortunes in the near term.






 

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