First Solar, Inc. (NASDAQ:FSLR) missed earnings estimates last night, but the company has a good excuse. RBC Capital Markets analysts say the miss was because of project delays and point to several positives in the company going forward. They increased their estimate for First Solar from $48 to $56 per share due to multiple expansion in the sector and maintained their Sector Perform rating on the company.

First Solar

First Solar to decide on YieldCo

The company’s management said on yesterday’s earnings call that they expect to decide about whether to launch a YieldCo by the time the next earnings call rolls around. They believe First Solar currently has enough assets that are generating cash flow to do an initial launch if they decide to do it.

In a report dated Aug. 5, 2014, analyst Mahesh Sanganeria and associate Shawn Yuan note that competitors have already been successful in launching their own YieldCos. As a result, they believe First Solar will also be able to successfully do it and see a boost in valuation.

First Solar improves efficiency

The analysts note that the company has continued to improve the efficiency of its solar modules. In the second quarter, they bumped it up to 14% from 13.5% in the previous quarter .They say this is the biggest improvement in efficiency in a single quarter.

At this point, the company’s module energy density has about a 12% disadvantage when compared to C-Si modules. First Solar management said they expect to cut down that disadvantage to 5% by the end of the year and gain the advantage next year.

First Solar misses earnings estimates

Last night First Solar reported earnings of 4 cents per share on $544 million in revenue. That compares to their estimate of 30 cents per share in earnings and $843 million in revenue. The RBC Capital team states that the revenue miss was mainly because the company pushed the revenue from its Campo Verde project to the first quarter. There was also a delay in revenue from Desert Sunlight because of an unexpected problem with inverter integration.

The analysts note that the company’s factory utilization fell to 80% from 82% in the previous quarter because it was rolling out new, more efficient technology. First Solar reported a 17% gross margin for the quarter, which was ahead of their estimate of 15%. However, it was still a quarter over quarter decline because of the revenue mix in systems and also higher sales of modules. First Solar saw a tax benefit of $2 million in the second quarter.

First Solar reiterates guidance

Last night management maintained their full year revenue guidance of between $3.7 billion and $4 billion and their earnings per share guidance of between $2.40 and $2.60 per share. They increased their gross margin guidance to between 18% and 19%. Management said higher operating expenditures will offset that improvement in gross margin. They increased their operating expenditure guidance from between $365 million and $385 million to between $380 million and $395 million, which is why they did not change their earnings per share guide.

The RBC team also updated their own estimates after First Solar’s second quarter report. Their third calendar quarter estimate from $960 million to $1.068 billion in revenue, while their earnings estimate goes from 45 cents to 63 cents per share. They kept their full year revenue estimate the same at $3.85 billion but raised their earnings per share estimate from $2.46 to $2.61 per share.