First Solar Reports Strong Results, But Remains Cautious


Following months of bearish stories about the prospects for thin-film solar, First Solar (s fslr) delivered the kind of results for the second quarter that Wall Street likes to refer to as “blowout.” Revenue and net income nearly doubled in the recent 3-month period and both were wildly ahead of investor forecasts. But the company remains cautious about the rest of 2009, saying low demand and falling prices could remain problems.

First Solar said its revenue in the quarter ended June 27 totaled $526 million, up 97 percent from the same quarter a year ago and up 26 percent from a year ago. Net income came in at $180.6 million, or $2.11 per share, compared with $69.7 million, or 85 cents per share, a year ago. Analysts had been looking for revenue of $459 million and a net profit of $1.62 a share.

First Solar’s revenue grew while its profit margins fell last quarter, adding further to profits. Its operating income rose to 38.8 percent of revenue in the second quarter, compared with an operating margin of 33.2 percent in the year-ago period.

Despite the strong showing, First Solar said its earnings guidance for all of 2009 would remain the same as it was three months ago: Revenue between $1.9 billion and $2 billion and operating margin between 31 percent and 33 percent, which is significantly lower than the margin in recent quarters.

Adding to concern, First Solar said that falling prices of polysilicon panels and financing constraints are slowing installations of thin-film projects in Germany, the company’s largest market. In response, First Solar is offering rebates and discounts on its products that could boost demand but also weigh down profits in coming quarters.

In after-hours trading, First Solar’s share price shot up as much as 10.6 percent higher from its official closing price of $173.55. But after executives discussed guidance in a conference call, the stock fell to $166.40. The stock has risen from $144 since on July 14 amid hope for the solar sector. Last Friday, SunPower also reported surprisingly strong earnings, sparking a rally that spread to other solar companies, including First Solar.

First Solar has been a flagship stock in the volatile solar sector, surging after its 2006 debut and even outperforming other stocks in harder times. But a number of analyst reports and stories in the financial press taken bearish views of the company’s future in recent months, arguing that prices of more efficient polysilicon solar panels were falling far enough to steal share from First Solar’s thin-film panels.

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