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First Solar (FSLR) Up 11.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for First Solar (FSLR - Free Report) . Shares have added about 11.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is First Solar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

First Solar Q2 Earnings & Revenues Beat Estimates

First Solar Inc. reported second-quarter 2020 adjusted earnings of 35 cents per share, which surpassed the Zacks Consensus Estimate of 25 cents by 40%. The reported figure also improved significantly from the prior-year quarter’s loss of 18 cents.

Sales Update

First Solar’s sales of $642.4 million in the reported quarter exceeded the Zacks Consensus Estimate of $527 million by 21.9%. Moreover, the top line witnessed a 9.8% increase from the year-ago quarter’s $585 million, primarily due to the sale of the American Kings project.

Operational Highlights

In the second quarter, gross profit totaled $137.5 million, which surged significantly from $77.2 million reported in the year-ago quarter.

Total operating expenses increased 0.9% to $86.6 million due to production start-up costs and litigation losses.

However, the company reported an operating income of $50.9 million against an operating loss of $8.6 million incurred in the year-ago quarter. The upside can primarily be attributable to significantly higher gross profit in the quarter.

Financial Performance

First Solar had $1,052.7 million of cash and cash equivalents as of Jun 30, 2020, down from $1,352.7 million as of Dec 31, 2019.

Long-term debt totaled $387.7 million at the end of the second quarter compared with $454.2 million as of Dec 31, 2019.

2020 Outlook

First Solar has withdrawn its 2020 guidance, given the uncertainty regarding the severity and duration of the COVID-19 pandemic and its impact on the company’s operations and financial results as well as the energy and capital markets.

However, it continued to provide its 2020 module production, operating expenses and capital expenditure guidance. First Solar expects 2020 module production to be 5.9 GWDC, including 5.7 GWDC of Series 6 and 0.2 GWDC of Series 4. It expects operating expenses of $345-$365 million and capital expenditures of $450-$550 million for 2020.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -8.02% due to these changes.

VGM Scores

At this time, First Solar has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, First Solar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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