First Solar, Inc. :FSLR-US: Earnings Analysis: Q4, 2016 By the Numbers : February 23, 2017

First Solar, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of First Solar, Inc. – SunPower Corporation, General Electric Company and REC Silicon ASA Unsponsored ADR (SPWR-US, GE-US and RNWEY-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 480.43 million, Net Earnings of USD -719.86 million.
  • Gross margins narrowed from 24.56% to 13.24% compared to the same period last year, operating (EBITDA) margins now -7.59% from 20.77%.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 480.43 688.03 934.38 848.48 942.32
Revenue Growth (%YOY) -49.02 -45.82 4.26 80.97 -6.51
Earnings (mil) -719.86 154.15 13.41 170.57 164.14
Earnings Growth (%YOY) -538.58 -55.87 -85.81 373.82 -14.49
Net Margin (%) -149.84 22.4 1.43 20.1 17.42
EPS -6.92 1.49 0.13 1.66 1.6
Return on Equity (%) -51.61 10.49 0.93 12.09 12.01
Return on Assets (%) -38.51 7.89 0.71 9.16 9.13

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Market Share Versus Profits

Revenues History
Earnings History

FSLR-US‘s change in revenue this period compared to the same period last year of -49.02% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that FSLR-US is holding onto its market share. Also, for comparison purposes, revenues changed by -30.17% and earnings by -567.00% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 24.56% to 13.24%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 20.77% to -7.59% in this time frame. For comparison, gross margins were 27.07% and EBITDA margins were 21.82% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

FSLR-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 392.97 days, compared to last year’s level of 215.04 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 13.99% to -7.59% and (2) one-time items that contributed to a decrease in pretax margins from 13.80% to -161.61%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

First Solar, Inc. operates as a solar energy solutions company. It engages in the designing, manufacturing, marketing and distribution of photovoltaic solar power systems and solar modules with an advanced thin-film semiconductor technology. The company operates in two business segments: Components and Systems. The Components segment designs, manufactures and sells solar modules primarily to solar project developers and system integrators. The Systems segment provides a complete solar power system solution, which includes project development, engineering, procurement and construction services, operating and maintenance services. It also develops sites for building solar power systems using solar modules and provides a complete solar power system solution, which includes project development, engineering, procurement and construction services, operating and maintenance services. The company was founded by Michael J. Ahearn in 1999 and is headquartered in Tempe, AZ.

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