First Solar, Inc. Q2 2017 Earnings Preview: Room For Upside

First Solar, Inc. Q2 2017 Earnings Preview: Room For Upside

First Solar Q2 2017 earnings are due after closing bell tonight, but the company’s stock has dropped off sharply today after spiking in the early morning hours. Solar stocks in general have been volatile over the last several months, driven by President Trump’s policy on solar power, which as yet is unclear. Cheap Chinese-made solar panels are also flooding the U.S. market and putting some American solar companies out of business.

First Solar Q2 2017 earnings preview

So how is First Solar managing in the midst of these difficulties? The company’s second-quarter earnings report will provide us with some clues.

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Consensus estimates for First Solar Q2 2017 earnings suggest losses of 1 cent per share on $556.4 million in revenue. However, the company guided for a breakeven quarter but noted that it could greatly beat that by selling a project. In last year’s second quarter, the firm reported adjusted earnings of 87 cents per share on $934 million in revenue. GAAP earnings came in at 13 cents per share in the year-ago quarter.

Deutsche Bank analyst Vishal Shah said in a note to investors earlier this month that the momentum could continue for First Solar. As far as First Solar Q2 2017 earnings go, he sees upside to estimates, mainly because he believes component margins are better than expected.

Momentum could continue for First Solar

He also noted that recognition of the revenue from the Switch Station project wasn’t baked into the company’s guidance. Further, he believes estimates could move much higher if the company recognizes the $55 million tax benefit, which isn’t included in guidance either. First Solar sold its 180-megawatt Switch Station project recently, and he estimates the revenue from that sale at $200 million to $250 million, all of which would be pure upside for First Solar Q2 2017 earnings.

He added that only a 5-cent improvement in module pricing on 1 gigawatt of S4 capacity may result in an extra $50 million in gross profits or 40 cents per share of positive impact for fiscal 2017. Additionally, his checks suggest that First Solar is looking to monetize the sale of its 250-megawatt India projects, which also isn’t included in guidance.

In addition to the actual earnings numbers, Shah looks for commentary on the company’s new S6 solar modules, as it was planning to start shipping them to international customers to get feedback. He wants to hear about the progress in those other markets and expects more details on capital expenditures and the cost outlook for the S6 capacity.

Leading up to the First Solar Q2 2017 earnings release, the company’s stock tumbled by more than 1% during regular trading hours today, falling as low as $44.19 before bouncing.

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