After the closing bell on April 29, leading American solar technology company First Solar Inc. (FSLR, Financial) reported earnings results for the first quarter of 2021.
The company posted earnings and revenue that blew away analysts' expectations, driven by demand for its Series 6 technology. First Solar's stock price gained 1% in after-hours trading following the news.
Earnings results
For the quarter, the company reported revenue of $803 million, representing a $194 million increase compared to the year-ago quarter. Adjusted earnings per share came in at $1.96 versus adjusted earnings of 85 cents in the first quarter of 2020. Analysts had been expecting revenue of $772.88 million and adjusted earnings of 98 cents.
The second Series 6 factory in Malaysia exited the ramp period, increasing nameplate manufacturing capacity to 7.9 Gigawatts. The company says it is now on track to achieve its target of 11% reduction in the cost per watt produced by the end of 2021.
Despite planned and unplanned downtime, the company managed to deliver strong manufacturing results, with fleet-wide capacity utilization of 92% to 99%. Year-to-date net bookings amounted to 4.8 GW DC.
In terms of project sales, the company completed the sales of the Sun Streams 2, 4 and 5 projects, though the Sun Streams 3 sale was completed in April after the quarter ended.
As part of its strategy to streamline its business to focus on its main specialty, the manufacturing of thin-film solar modules, First Solar sold its U.S. project development and North American operations and management business to NovaSource Power Services during the quarter.
The company ended the quarter with cash and cash equivalents of $972.87 million compared to long-term debt of $254.44 million.
CEO Mark Widmar had the following to say about the quarter:
"We delivered strong operational and financial results for the first quarter, and demand for our Series 6 technology continues to be robust… The dedication we continue to witness from our associates enabled us to deliver module segment gross margin in line with our first quarter guidance, complete the sales of our Sun Streams 2, 4, and 5 projects, and close the U.S. project development and North American O&M sales. This, coupled with manufacturing execution, enabled us to deliver solid EPS in the first quarter."
Looking forward
Looking ahead to full-year 2021, First Solar reiterated its adjusted earnings per share guidance of $4.05 to $4.75. Revenue is expected to fall between $2.85 billion and $3.025 billion, with capital expenditures of $425 million to $475 million.
The company's decision to trim its business down came as a result of increased competition driving down margins in the solar projects development business. By focusing exclusively on the higher-margin panel manufacturing business, First Solar expects to see improvements in its gross margin.
Valuation
As of market close on April 29, First Solar trades at a price-earnings ratio of 23.4, which is below the industry median of 33.6 but above its own 10-year median of 17.02. The GuruFocus Value chart rates the stock as significantly overvalued.
However, the GF Value is based on the company's past growth, which has suffered recently due to the company's streamlining efforts, as well as analyst expectations of future results, and analysts currently peg the company for seeing both its top and bottom lines shrink over the next few years. If the company can successfully grow its business in the coming years due to its renewed focus on its primary area of expertise, it could turn out to be a good buy at current levels.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.
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