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First Solar (FSLR) Q4 Earnings: Disappointment in Store?

Zacks

First Solar, Inc. FSLR is set to report fourth-quarter 2016 earnings results after the closing bell on Feb 21. Last quarter, the company delivered a positive earnings surprise of 76.81%. Let's see how things are shaping up for this announcement.

Factors at Play

During the third-quarter earnings call, the company said that it has a number of booking opportunities in the fourth quarter that are well-positioned in spite of the present market scenario.

Again, the balance revenues related to the sale of Stateline project will be realized in the to-be-reported quarter. Moreover, module bookings in the third quarter are expected to be shipped in the fourth quarter. This will likely drive the top line of the company.

First Solar has lowered its revenue guidance for 2016 during the third-quarter earnings call to the band of $2.8–$2.9 billion from the earlier projected range of $3.8–$4 billion. The company also lowered its panel shipment projection to the 2.8−2.9 GW band from 2.9−3.0 GW projected earlier. However, it has raised the gross margin guidance to the range of 25.5–26% from 18.5–19% guided earlier. In addition full-year earnings are expected in the band of $4.30−$4.50 per share compared to $4.20−$4.50 estimated previously.

Like other solar majors – SunPower Corp. SPWR and Vivint Solar Inc. VSLR – the booming U.S. solar market is expected to drive top-line growth at First Solar as well. Nonetheless, the victory of Donald Trump has raised uncertainties in the alternative energy industry. Far from supporting the renewable sector with any kind of incentives, the President-elect has promised to revive coal.

For the fourth quarter, the Zacks Consensus Estimate for earnings is 97 cents, reflecting a 39.4% year-over-year decline, with revenues expected to come in at $391.8 million, representing an approximately 58.4% decrease.

First Solar, Inc. Price and EPS Surprise


First Solar, Inc. Price and EPS Surprise | First Solar, Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that First Solar is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: First Solar has an Earnings ESP of 0.00%. This is because the Most Accurate estimate of 97 cents stands in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: First Solar’s Zacks Rank #4 (Sell), when combined with an Earnings ESP of 0.00%, makes our surprise prediction difficult for this quarter.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock to Consider

Here is an operator in the solar space that you may consider, as our model show that the company has the right combination of elements to post an earnings beat this quarter:

Sunrun Inc. RUN will report fourth-quarter results on Mar 8. The company has an Earnings ESP of +244.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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