First Solar (FSLR) Stock Declined Today After Rival Provided Light Fourth Quarter Guidance

NEW YORK (TheStreet) -- First Solar (FSLR) shares closed trading down 2.75% to $49.59 in trading on Wednesday after the company's industry rival Canadian Solar (CSIQ) issued light fourth quarter financial guidance in its third quarter earnings results before the opening bell today.

Canadian Solar said that it expects to ship 810 to 860 megawatts of solar modules and in turn will generate between $925 million and $975 million for the current quarter. Analysts on average are expecting the company to report earnings of $977.5 million when it releases that information early next year.

The company did however deliver a more profitable than expected third quarter, reporting earnings of $1.75, well ahead of analysts' $1.16 estimates for the period.

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First Solar reported revenue of $889 million when it released its earnings last week, a 30% drop from the same period last year. Yesterday analysts at Argus maintained the company's "buy" rating and $79 price target yesterday despite the earnings miss.

"In our view, First Solar will likely be the only solar power player to generate positive cash flow over the next three years. That said, we expect quarterly earnings to be "lumpy" due to the timing of revenue recognition and project sales, and would not place too much emphasis on variations in quarter-to-quarter results," said analysts.

TheStreet Ratings team rates FIRST SOLAR INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate FIRST SOLAR INC (FSLR) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • FSLR's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, FSLR has a quick ratio of 2.12, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The revenue fell significantly faster than the industry average of 18.4%. Since the same quarter one year prior, revenues fell by 29.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for FIRST SOLAR INC is rather low; currently it is at 21.28%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 9.94% significantly trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, FIRST SOLAR INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: FSLR Ratings Report
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