FirstSolar (FSLR) Q4 Ahead of Expectations with Catalyst Coming - Baird
First Solar (NASDAQ: FSLR) beat estimates across the board and showed strong gross margin. Additionally, FSLR significantly expanded its potential booking opportunities, particularly in North America, and maintained 2016 EPS guidance, which was expected to be cut given the ITC extension. Baird analyst, Ben Kallo, believes that FSLR is the best Solar play in 2016+ given its strong balance sheet, ability to quickly ramp capacity through dormant production lines, and industry-leading cost structure. No change to Outperform rating but the PT increases to $74 from $69.
FSLR reported revenue of $942M vs. consensus estimates of $929M, and gross margin of 24.6% vs. 20.0%. Net income was $164M vs. consensus estimates of $78M, while EPS was $1.60 vs. $0.77.
2016 revenue guide slightly lowered to reflect project shifts to 2017, although gross margin guide raised and EPS guide maintained. FSLR guided to 2016 sales of $3.8B to $4.0B versus its previous guidance of $3.9B-$4.1B, raised its gross margin guidance to 17% to 18% versus its previous guidance of 16%-18%, and maintained its EPS guidance of $4.00-$4.50. They have adjusted their model accordingly and believe FSLR remains well positioned to expand margins through continued efficiency gains and cost reductions.
FSLR expanded its potential bookings opportunities from 17.4 GW on October 29, 2015 to 20.3 GW as of February 23, an increase of ~17%. Importantly, ~40% of total opportunities are in North America, which should provide U.S. projects with healthy margins given the ITC extension. Additionally, ~4.5 GW are mid- to late-stage opportunities, which provides confidence in FSLR’s ability to fill its order book for 2017+.
Bears may focus on low YTD bookings, although bookings should ramp throughout the year. FSLR has booked ~200MW YTD, although U.S. utilities will reevaluate the cost competitiveness of solar in 2017+ given the ITC extension. FSLR has ~4.4 GW of expected module shipments, which provides solid revenue visibility through 2016.
FirstSolar is hosting an analyst day on April 5th which will highlight expected capacity ramp, cost reduction and efficiency targets, U.S. and international strategy, and could provide additional thoughts around 2017+.
The FSLR PT is derived from a ~19x P/E multiple on the average of 2016/2017 EPS estimates plus $4 per share for the ownership interest in CAFD.
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Shares of First Solar closed at $61.79 yesterday.