First Solar Soars. A Setback Could Be a ‘Blessing in Disguise.’

First Solar met earnings per share expectations of $4.24 and slightly outpaced sales estimates. (Courtesy First Solar)

Key Points

• First Solar’s shares rose 13% despite reduced full-year revenue, earnings, and production expectations.
• The company met earnings per share expectations of $4.24 and slightly exceeded sales estimates with $1.6 billion in revenue.
• Protectionist policies against imported solar panels benefit First Solar, which plans to expand its U.S. manufacturing capacity.

Shares of First Solar jumped 13% on Friday, even after it reduced full-year revenue, earnings, and production expectations.

The company, America’s largest solar manufacturer, appears to have found a way to persevere despite the Trump administration’s cuts to renewable energy support.

First Solar met earnings per share expectations of $4.24 and slightly outpaced sales estimates, with $1.6 billion in revenue. It cut its full-year earnings per share guidance to a range of $14-$15 from $13.50-16.50, and lowered its production expectations.

The decrease was caused by several factors, including the termination of a large contract to supply BP with solar products, expenses to expand its solar manufacturing in the U.S., and problems at supplier factories that curbed First Solar’s production capabilities.

All that said, First Solar appears to have strong growth prospects ahead, according to analysts. While President Donald Trump’s tax bill cut subsidies for solar installations, his protectionist policies toward Chinese solar panels are helping First Solar.

The tax bill imposed new penalties on companies that use solar goods manufactured elsewhere, increasing the value of domestic manufacturing. First Solar already makes most of its solar modules in the U.S., but is going to bring more of its overseas production here. The company said it plans to build a new factory to do the final assembly on 3.7 gigawatts worth of solar modules at a not-yet-disclosed location. It sold 5.3 gigawatts of modules in the latest quarter.

Jefferies analyst Julien Dumoulin-Smith wrote that losing the BP order may be a “blessing in disguise” for First Solar, because the contract was signed at a lower price-per-watt than First Solar can get if it rebooks the same capacity with a new customer. He increased his price target to $269. Shares now trade around $264.

Mizuho analyst Maheep Mandloi agrees, arguing the company is in strong shape to raise prices given the escalating cost to import foreign panels. He raised his price target 20% to $335.

Write to Avi Salzman at avi.salzman@barrons.com