First Solar (FSLR) Q3 Earnings: Stock To Beat Estimates?

First Solar, Inc. (NASDAQ:FSLR) is set to report third-quarter 2016 earnings results after the closing bell on Nov 2. Last quarter, the company delivered a positive earnings surprise of 50.00%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that First Solar is likely to beat earnings this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates, and First Solar has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.45%. This is because the Most Accurate estimate stands at 70 cents, while the Zacks Consensus Estimate is pegged slightly lower at 69 cents. This is a meaningful indicator of a likely positive earnings surprise.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: First Solar’s Zacks Rank #3, when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.

Conversely, Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

During the second-quarter earnings call, the company revealed that it expects restructuring charges of $15.0−$20.0 million to be reflected in the third-quarter results. Again, the balance revenues related to the sale of Southern will be realized in the to-be-reported quarter.

According to company filings, First Solar expects to derive a major portion of its 2016 revenues from the sale of utility-scale projects in North America. Currently, these have been categorized as advanced-stage projects. Earlier, the company had said that it expects to recognize the majority of its revenue from advanced-stage projects in the second half of 2016.

Like other solar majors – SunPower Corp. (NASDAQ:SPWR) and Vivint Solar Inc. (NYSE:VSLR) – the booming U.S. solar market is expected to drive top-line growth at First Solar as well.

For the third quarter, the Zacks Consensus Estimate for earnings is 69 cents, reflecting a 79.8% year-over-year decline, with revenues are expected to come in at $966.7 million, representing an approximately 24% decrease.

A Peer Release

Sunrun Inc. (NASDAQ:RUN) is slated to report third-quarter 2016 results on Nov 10. The company has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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