First Solar (NASDAQ:FSLR) Posts Better-Than-Expected Sales In Q4
Solar panel manufacturer First Solar (NASDAQ:FSLR) announced better-than-expected revenue in Q4 CY2024, with sales up 30.7% year on year to $1.51 billion. The company expects the full year’s revenue to be around $5.55 billion, close to analysts’ estimates. Its GAAP profit of $3.65 per share was 23.9% below analysts’ consensus estimates.
Revenue: $1.51 billion vs analyst estimates of $1.48 billion (30.7% year-on-year growth, 2% beat)
EPS (GAAP): $3.65 vs analyst expectations of $4.80 (23.9% miss)
Adjusted EBITDA: $587.3 million vs analyst estimates of $661.5 million (38.8% margin, 11.2% miss)
Management’s revenue guidance for the upcoming financial year 2025 is $5.55 billion at the midpoint, in line with analyst expectations and implying 31.9% growth (vs 27.7% in FY2024)
EPS (GAAP) guidance for the upcoming financial year 2025 is $18.50 at the midpoint, missing analyst estimates by 10.6%
Operating Margin: 30.2%, down from 34.3% in the same quarter last year
Free Cash Flow Margin: 32.9%, up from 18.5% in the same quarter last year
Market Capitalization: $16.37 billion
“In 2024, we continued building the foundations required for our long-term growth strategy,” said Mark Widmar, CEO, First Solar.
Headquartered in Arizona, First Solar (NASDAQ:FSLR) specializes in manufacturing solar panels and providing photovoltaic solar energy solutions.
Renewable energy companies are buoyed by the secular trend of green energy that is upending traditional power generation. Those who innovate and evolve with this dynamic market can win share while those who continue to rely on legacy technologies can see diminishing demand, which includes headwinds from increasing regulation against “dirty” energy. Additionally, these companies are at the whim of economic cycles, as interest rates can impact the willingness to invest in renewable energy projects.
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, First Solar grew its sales at a mediocre 6.5% compounded annual growth rate. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.
First Solar Quarterly Revenue
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. First Solar’s annualized revenue growth of 26.7% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
First Solar Year-On-Year Revenue Growth
This quarter, First Solar reported wonderful year-on-year revenue growth of 30.7%, and its $1.51 billion of revenue exceeded Wall Street’s estimates by 2%.
Looking ahead, sell-side analysts expect revenue to grow 30.4% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and implies its newer products and services will fuel better top-line performance.
Operating margin is a key measure of profitability. Think of it as net income – the bottom line – excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
First Solar has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 19.8%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Looking at the trend in its profitability, First Solar’s operating margin rose by 21.4 percentage points over the last five years, as its sales growth gave it immense operating leverage.
First Solar Trailing 12-Month Operating Margin (GAAP)
This quarter, First Solar generated an operating profit margin of 30.2%, down 4.2 percentage points year on year. Since First Solar’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
First Solar’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.
First Solar Trailing 12-Month EPS (GAAP)
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For First Solar, its two-year annual EPS growth of 453% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q4, First Solar reported EPS at $3.65, up from $3.25 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects First Solar’s full-year EPS of $12.01 to grow 71.9%.
We enjoyed seeing First Solar beat analysts’ revenue expectations this quarter. On the other hand, its EPS, EBITDA, and full-year EPS guidance fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $148.35 immediately after reporting.
