Morningstar | First Solar's Backlog Keeps Growing as Healthy Demand Remains Tailwind
We are reaffirming our $58 per share fair value estimate for First Solar after it reported a loss of $0.64 per share in the first quarter of 2019. The loss for the quarter was expected, and we are maintaining our full-year earnings estimate. We are also reaffirming our no-moat and stable moat trend ratings.Higher startup costs for the company’s new factories and lower closed sales in the quarter weighed on results. We expect the timing of project sales will reverse in the second half. Management raised its outlook for revenue in 2019 to $3.5 billion-$3.7 billion on stronger sales, in line with our estimate.
Although gross margins are down slightly, total costs remain in line with our estimate. We expect gross margins to dip for the next two years but rebound as new production ramps up. Management reaffirmed its $2.25-$2.75 earnings per share guidance for 2019, also in line with our expectations.
First Solar continues to support an impressive backlog with bookings that exceed shipments. After adding a net 300 megawatts of new bookings in the first quarter and another 1.1 gigawatts of new bookings in April, First Solar now has a 12.2 GW backlog. This mean the company has effectively sold out all of its manufacturing capacity for the rest of 2019, 2020, and into 2021.
We consider this a good start toward monetizing its investments in new Series 6 capacity in Vietnam, Ohio, and Malaysia. First Solar will have to maintain a strong backlog for many years to ensure its investment in new manufacturing capacity produces good returns for shareholders. We think the solar market is growing enough to support First Solar’s sales growth projections even as competitors add capacity.
First Solar is a provider of photovoltaic (PV) solar energy solutions. The company designs, manufactures and sells PV solar modules with a thin film semiconductor technology, and also develops and sells PV solar power systems that mainly use the modules it manufactures. The company also provides operations and maintenance (O&M) services to system owners. The company's modules segment involves the design, manufacture and sale of cadmium telluride solar modules, which convert sunlight into electricity. The company's second segment is its systems segment, through which it provides power plant solutions, which include project development, engineering, procurement, and construction services and O&M services.
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