First Solar, Inc.FSLR is expected to report second-quarter 2015 earnings results on Aug 4, 2015, after the market close.
Last quarter, First Solar had posted a significant 113.79% negative earnings surprise. Let's see how things are shaping up for this announcement.
Factors at Play
Tempe, AZ-based First Solar is evidently focused on research and development. In Jun 2015, it set a world record for cadmium-telluride (CdTe) photovoltaic (PV) module conversion efficiency, achieving 18.6% aperture efficiency for an advanced full size module. To put it simply, their solar module has increased the amount of sunlight converted into electricity at the highest recorded efficiently rate. During the company's first quarter, First Solar's best modules had maintained an average efficiency of 16.3%. The record has been measured and certified by the U.S. Department of Energy's National Renewable Energy Laboratory.
This leading solar-panel manufacturer of the U.S. won a contract to supply its PV modules for the 200 megawatt second phase of the Mohammed bin Rashid Al Maktoum solar park in Dubai. This will be the largest solar plant of its kind in the Middle East upon completion in early 2017. It is believed to be worth $200 million, as per media reports. First Solar technology and products have also been chosen by Nashville-based renewable energy provider Silicon Ranch Corporation or Aerojet Rocketdyne Project.
In the quarter under review, First Solar launched a Yield Co called 8Point3 Energy Partners LP CAFD in a partnership with SunPower Corporation SPWR . Yield Cos possess completed renewable energy projects that have long-term power-purchase agreements in place to deliver dividends to investors. These are designed to provide a dependable stream of cash flow to investors.
However, it is worth mentioning here that the company's first-quarter sales were hurt because of the retaining of projects meant for the Yield Co joint venture. This was further exacerbated by multiple project delays and a higher mix of module-only sales.
Overall, the second quarter will be influenced by a mix of lower-margin engineering, procurement, and construction or EPC projects and third-party module sales leading to lower earnings. The second half however is expected to see a stronger financial rebound than the first half as the company expects to return to a more normal course of business.
Our proven model shows that First Solar is unlikely to beat earnings estimates 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. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP for First Solar is -71.43% - the difference between the Most Accurate estimate of 2 cents and the Zacks Consensus Estimate of 7 cents. This indicates a likely negative surprise.
Zacks Rank: First Solar holds a Zacks Rank #5, which when combined with a negative ESP, makes an earnings beat unlikely. As it is, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Unlike First Solar we see a likely earnings beat coming from this industry peer.
SunEdison, Inc. SUNE has an earnings ESP of +13.33% and a Zacks Rank #3.