First Solar Q4 Beats, Outlook Bright for Company

First Solar Inc. (FSLR) surpassed the Zacks Consensus earnings per share (EPS) estimate of $1.76 by 4 cents to reach $1.80 in the fourth quarter of fiscal 2010. It also exceeds the year-ago quarterly EPS of $1.65.

The upside came from higher module shipments and lower module cost per watt. This was partially offset by reduced module average selling prices and increased expenses. However the tables tumbled on comparing with the sequential quarterly number of $2.04. The downside came from lower net sales and increased expenses, partially offset by higher gross margins.

Operational Performance

First Solar’s quarterly revenues were $609.8 million, down 4.9% from $641.3 million in the fourth quarter of 2009, falling behind the Zacks Consensus Estimate of $648 million. The downside came from decreased systems revenue and reduced module prices, partially offset by higher volume.

Also, compared to the third quarter of 2010, revenue decreased $188 million, primarily due to lower system sales and pricing. This was partially offset by an increase in volume.

First Solar in the reported quarter upped its module production to 395 megawatts, up 27% versus prior year and 13% quarter-over-quarter. The sequential increase was driven by a higher line throughput, improved conversion efficiency and six additional days of production due to adoption of a calendar year for financial reporting.

The annual capacity per line increased by 3 megawatts quarter-over-quarter to 62.6-megawatt per line. First Solar’s conversion efficiency was 11.6%, which has been up by half a percentage point year-over-year. The company’s manufacturing cost per watt was $0.75, which dropped $0.09 or 11% year-over-year and $0.02 compared to the sequential quarter.

Financial Performance

First Solar reported $765.7 million of cash and cash equivalents at the end of 2010 down from $664.5 million at year-end 2009. Long-term debt increased to $210.8 million from $146.4 million at December 2009.

Outlook

Based in Phoenix, Arizona, First Solar designs, manufactures and sells solar electric power modules using a proprietary thin film semiconductor technology. The company's solar modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity.

First Solar’s growth story will attain glory with its utility-based order backlog and strong balance sheet. The company focused on capacity build-outs, technological enhancements and cost minimization, and enjoys technological superiority over its silicon-based solar peers.

For fiscal 2011, First Solar expects its sales to be in the range of $3.7 billion - $3.8 billion. Earning per share is expected between $9.25 and $9.75. We are currently Neutral on the Zacks #3 Rank stock. In the near-term we would advise investors to focus on the Zacks #1 Rank (short-term Strong Buy rating) peers like LDK Solar Company Ltd (LDK).