First Solar FSLR is scheduled to release third-quarter 2024 results on Oct. 29, after market close.
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The Zacks Consensus Estimate for revenues is pegged at $1.08 billion, implying a 34.6% improvement from the year-ago reported figure. The consensus mark for earnings is pegged at $3.16 per share, suggesting a 26.4% surge from $2.50 reported in the prior-year quarter. The bottom-line estimate has, however, moved down 4.2% in the past 60 days.
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First Solar has an impressive earnings surprise history. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 14.75%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for FSLR this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
First Solar has an Earnings ESP of -4.15% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Key Factors to Consider
Thanks to the continued robust solar demand prevalent worldwide, First Solar has been witnessing a solid order flow for its modules in recent times, which must have boosted its third-quarter top-line performance. To meet the growing solar demand, the company has been steadily expanding its manufacturing capacity, as a result of which its module production might have increased in the soon-to-be-reported quarter.
Notably, in September 2024, the company inaugurated its new $1.1-billion fully vertically integrated thin-film solar manufacturing facility in Lawrence County, AL, thereby adding 3.5 gigawatts (GW) to its U.S. nameplate solar manufacturing capacity.
The consensus estimate for module production is pegged at 4 gigawatts (GW), which reflects an improvement of 47.2% from the year-ago reported actuals.
Solid sales volume from higher shipments of its modules, particularly series 7, backed by robust demand for solar products and enhanced module production from expanded facilities, is likely to have boosted First Solar’s third-quarter revenues.
The consensus estimate for FSLR’s modules sold reflects a surge of 26% year over year, while that for modules sales, pegged at $1.12 billion, reflects an improvement of 39.6% from the year-ago reported actuals.
Improving average selling price (ASP) per watt sold might have also benefited the company’s revenues.
The strong top-line performance, along with solid gross margin expectations on account of higher mix of modules sold from FSLR’s U.S. factories, which qualify for Section 45X tax credits, is likely to have bolstered the company’s bottom-line performance. Higher utilization across its manufacturing plants, backed by increased manufacturing capacity, is also likely to have added an impetus to FSLR’s earnings growth.
However, higher production start-up expenses, primarily for its fourth manufacturing facility in the United States, along with higher research and development (R&D) expenses associated with the development of next-generation solar technologies, might have had some adverse impact on FSLR’s overall third-quarter earnings.
Price Performance & Valuation
First Solar’s shares have exhibited an upward trend, gaining a notable percentage over the year-to-date period. Specifically, the stock surged a solid 11.7% year to date, outperforming the Zacks solar industry’s decline of 30.4%.
YTD Performance
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As evident from the image, other notable stocks from the same industry plunged year to date and lagged FSLR’s performance. Shares of Canadian Solar CSIQ, JinkoSolar JKS and Enphase Energy ENPH have lost 54.4%, 43.3% and 30.4%, respectively, year to date.
From a valuation perspective, First Solar is trading at a premium when compared to its industry. Currently, FSLR is trading at 3.80X forward 12 months sales, which is higher than the industry’s forward sales multiple of 1.54X. It’s valuation also seems stretched when compare to its five-year median.
Price-to-Sales (forward 12 Months)
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Investment Thesis
With the impressive solar installation trend prevailing worldwide, First Solar is unlikely to disappoint its investors with its third-quarter top and bottom-line performances. Impressively, the company achieved a record-high global average module material recovery rate of 95%, as per its 2024 sustainability report released in September 2024.
With its Series 6 Plus and Series 7 TR1 solar panels achieving the first EPEAT Climate+ designation in the world (by meeting the ultra-low-carbon threshold of ≤400 kg CO2e/kWp), the company continues to enjoy the position of the largest solar manufacturer in the Western Hemisphere.
However, First Solar has been facing certain adversities lately, which might be a cause of concern for its investors. These challenges include political and policy-related uncertainties, irrational global supply conditions as well as uncertainties in the evaluation of strategic directions and capital allocation by certain large multinational companies. Notably, with the upcoming U.S. election in November, the solar industry is once again facing an uncertain policy environment in the form of growing limitations on access to capital. This could potentially hinder FSLR’s ability to invest in the expansion of its production capacity.
Should You Buy FSLR Now?
Investors should refrain from investing in this stock before coming Tuesday, considering FSLR’s premium valuation and the declining trend in its earnings estimate observed lately. However, those who are holding it might continue to do so, considering the annual improvement shown by its sales and earnings estimates and favorable year-to-date price performance.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
