Why Is First Solar (FSLR) Down 43.2% Since Last Earnings Report?

It has been about a month since the last earnings report for First Solar (NASDAQ:FSLR). Shares have lost about 43.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is First Solar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

First Solar Q4 Earnings Lag Estimates, Sales Rise Y/Y

First Solar reported fourth-quarter 2019 adjusted earnings of $2.02 per share, which missed the Zacks Consensus Estimate of $2.79 by 27.6%.

Including one-time litigation losses, the company reported GAAP loss of 56 cents per share against earnings of 50 cents recorded in the prior-year quarter.

For 2019, the company reported adjusted earnings of $1.48 compared with the Zacks Consensus Estimate of $2.45 per share.

Sales

First Solar’s sales of $1,399.4 million in the reported quarter missed the Zacks Consensus Estimate of $1,759.7 million by 20.5%. However, the top line improved a massive 102.4% from the year-ago quarter’s $691.2 million.

For 2019, the company recorded revenues of $3.06 billion, which missed the Zacks Consensus Estimate of $3.44 billion by 11%. However, the full-year top line improved 36.5% from the year-ago quarter figure of $2.24 billion.

Operational Highlights

In the fourth quarter, gross profit totaled $333.6 million compared with $98.3 million in the year-ago quarter.

Total operating expenses surged a massive 417.1% to $451.4 million primarily due to litigation losses worth $363 million.

Consequently, the company incurred operating loss of $117.9 million at the end of fourth-quarter 2019 against operating income of $11 million in the year-ago quarter.

Financial Performance

First Solar had $1.35 billion million of cash and cash equivalents as of Dec 31, 2019, down from $1.40 billion as of Dec 31, 2018.

Long-term debt totaled $454.2 million at the end of 2019 compared with $461.2 million as of Dec 31, 2018.

2020 Guidance

The company currently expects to record earnings in the range of $3.25-$3.75 per share on sales of $2.7-$2.9 billion in 2020. The Zacks Consensus Estimate for 2020 earnings, pegged at $3.63, lies above the midpoint of the company’s projected range. The Zacks Consensus Estimate for 2020 sales, pegged at $3.38 billion, lies above the guided range.

Moreover, the company expects to incur operating expenses in the range of $340-$360 million while gross margin is projected in the band of 26-27%.

Meanwhile, First Solar forecasts shipment to remain in the band of 5.8-6.0 gigawatts.

How Have Estimates Been Moving Since Then?

Estimates review followed a flat path over the past two months. The consensus estimate has shifted -50.37% due to these changes.

VGM Scores

At this time, First Solar has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

First Solar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.