First Solar Plunges After Earnings Miss Expectations

The largest solar company in the world, Arizona’s First Solar (FSLR) saw its stock drop over 10.5 percent by early afternoon after an earnings report showed lower than expected results for the fourth quarter. This comes after First Solar took a hit when Germany announced a change in its subsidies policy last week to roll back government support for the industry far further and sooner than initially expected. On the whole, February has been a rough month for First Solar, with the company losing 23 percent over the period and erasing January gains to put shares down almost 3.5 percent in 2012.

2012 Guidance Revised Amid Earnings, Revenue Misses

First Solar managed to book $660 million in sales, which represents an 8.3 percent improvement year-over-year. It does, however, represent a significant miss in terms of analyst estimates, a fact that contributed to share prices falling as far as they have. Analysts had projected about $775 million in revenue. On the whole, First Solar recorded a net loss of $413 million or $4.74 a share for Q4 of 2011 against analyst estimates of a $1.02 in earnings.

Much of this could be attributed to one-time expenses, including writing down the value of goodwill by $393 million, $60 million in restructuring costs, and $164 million in warranty costs for flawed equipment. Excluding these one-time costs, the company earned $1.26 a share, falling well short of the $1.48 per share average analyst target.

Future Requires a Shift Away From Subsidies

The reduction in subsidies in Germany seemed to illustrate the need to move away from subsidized construction, something First Solar addressed after the release of its last earnings report.  First Solar intends to move towards a more sustainable business model by moving into the market of making panels for use in solar plants for utilities, but this most recent earnings call could be an indication that this shift could be a long and painful one. The company also lowered its 2012 revenue guidance from an earlier estimate of $3.6 billion to $3.7 billion to $3 billion to $3.3 billion.

“The key to First Solar’s success is to develop new markets that do not depend on subsidies, and we believe we can do this by focusing on regions in the world that are blessed with a lot of sun and need more peak electricity,” said First Solar Chairman and interim CEO Michael J. Ahearn. “Our superior module technology, combined with our ability to design, engineer, construct and maintain large solar electricity generation plants and integrate them with the grid, should enable us to reduce solar electricity prices to grid parity levels in these markets, while still making an attractive profit. Our demonstrated success in selling solar electricity and solar generation plants to leading U.S. utilities will provide targeted customers in these new markets with important validations of our capabilities.”

Solar Stocks Fall Across the Board

In an industry that tends to move in lockstep with good or bad news, the falling share prices and earnings miss for First Solar could be the reason why several other solar stocks losing ground today. JA Solar Holdings (JASO) was off just over 2 percent, SunPower Corporation (SPWR) lost almost 1.5 percent, Suntech Power Holdings (STP) dropped almost 2.5 percent, Yingli Green Energy (YGE) fell over 3 percent, and Trina Solar Limited (TSL) came down just under 2 percent.