Q4 Preview: First Solar (FSLR) Shines Bright Ahead of Earnings

First Solar, Inc. (Nasdaq: FSLR) is trading higher today, ahead of the company's fourth quarter 2010 earnings report, expected out after the market closes. The stock is up 1.5% this afternoon.

FSLR is expected to report EPS of $1.76 on revs of $647.80 million. Last quarter, the Tempe, AZ-based PV manufacturer reported EPS of $1.87, ex-items, on revs of $798 million, mixed to the consensus. Looking back at Q409, First Solar reported EPS of $1.65 on revs of $641.3 million, ahead of the consensus EPS of $1.52 and revs of $581.44 million.

Shares dropped 11.6% through the quarter, to $130.14 at the end of December. Shares are up nearly 27% since then, but finished 2010 down 4%.

A simple valuation pegs First Solar with a foward P/E of 18.2x FY11 EPS estimates, compared to 7.5x for Trina Solar Ltd. (NYSE: TSL), 8.4x at Suntech Power (NYSE: STP), and 5.5x for JA Solar (Nasdaq: JASO).

Data from Bloomberg has 21 analysts with a Buy on FSLR, 18 with a hold, and eight suggest to Sell. The analyst price target average is $156.50, with a high of $200 and low of $80. Shares have traded in a range of $175.45 - $98.71 over the last 52-weeks.

Summary

• Kaufman is looking for $657 million in revs with EPS of $1.82 on a GAAP basis. On revs, Kaufman comments: "We do not view the sequential decline as a concern as the EPC business is inherently lumpy and 3Q received an incremental ~$180 million in revenues from the Sarnia project. For the full year, we estimate $2.6 billion in revenues which is in line with consensus estimates."
  
  Kaufman is expecting FY11 revs of $3.85 billion and EPS of $9.65, reflecting better production levels, strong project pipeline, and modest selling price declines.
  
  The firm currently has a Hold on the shares, with price target of $165.
  
  
• Wedbush is more cautious on the shares into earnings, expecting margin contraction, pricing pressure, project development risks, and feed-in-tariff changes in key markets. Wedbush is looking for Q4 EPS of $1.75 on revs of $612 million. They think that FY11 ASPs for the systems business are high due to unsustainable factors, and that investors shouldn't carry those through FY12 - FY14. They see First Solar as overvalued.
  
  Wedbush has an Underperform on the shares, and price target of $100.
  
  
• Miller Tabak was more bullish on the shares after the announcement of a new 250-MW supply contract with Moser Baer Clean Energy Limited (MBCEL). The agreement will place FSLR in a better position to capitalize on India's downstream market. Miller notes that with the increasing population, as well as increase in diesel prices, solar will become a more attractive alternative to fossil fuels.
  
  Miller is looking for EPS of $1.97. They have a Buy and $190 price target on the shares.
  
  
• Collins Stewart is looking for revs of $629 million and EPS of $1.75. Collins is looking for shipments of 375-MW in the quarter. They cite lumpiness in project revs as why FSLR is expected to report down on a sequential and Y/Y basis.
  
  Additionally: "The greater portion of revenues from module sales to third-parties in our 4Q10 forecast leads to the 46.7% gross margin expectation, above the levels in the comparison quarters, in which the gross margin was pulled lower by project sales."
  
  Collins has a Buy and $165 price target on the shares.

First Solar did not provide guidance for the fourth quarter, but they did increase their FY10 EPS to a range of $7.50 - $7.65, which was above the Street at the time.

First Solar, Inc. is expected to release their Q410 earnings on Thursday, February 24, 2011, at approximately 4:00pm EST. Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of their release.

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