First Solar Easily Beats Expectations, Announces Search For New CEO

First Solar (FSLR) reported earnings of $418.2 million in revenue, with an EPS of $1.99 for the first quarter of 2009. That clobbers the street’s expectations of $406 million and $1.51 EPS.

It also released a seperate statement saying it’s “initiated a process to recruit its next chief executive officer to succeed Michael Ahearn.”

There isn’t any statement about the results in the earnings release, though the company’s net income climbed, while it’s revenue slid on a quarter to quarter basis. 

Net income is $165 million in Q109, versus $132 million in Q408. Revenue for Q408 was $433.7 million. Operating expenses fell $6 million from Q408 to Q109.

It appears as though Ahern will cease running the company to focus more on lobbying for the solar industry. “We are rapidly reaching the point where the evolution of the energy industry will be constrained not by technology or product costs, but rather by policies, programs and institutions that cannot adapt rapidly to the innovations that are occurring in clean energy,” says Ahern in the release. When the company speaks on its earnings call, we expect it will further explain Ahern’s decision.

First Solar, appears to be well positioned for the future, yet there are questions about the direction of the company. FBR Capital has wondered in two research notes, whether First Solar veering into unknown business territory by financing its own projects. We suppose this might get (somewhat) resolved this afternoon.

Here’s FBR’s questions:

We believe there are actually two more-important issues that have yet to be considered (as major risks to expectations). First, FSLR’s entry into turnkey services is materially different from simply making and selling modules; thus, the cost implications are neither well understood nor dialed into consensus estimates. As FSLR increases the mix of its system sales (as part of providing turnkey services), the balance-of-the-system (BOS) cost cannot easily be reduced since the majority of the cost is material cost (thus highly dependent on FSLR’s ability to secure inexpensive material at each site), which, consequently, could lead to higher inventories and lower FCFs.

Second, investors have yet to fully understand and dial in the risks associated with project financing. Although the company has been saying (post-4Q08’s conference call) that it intends to repackage and resell the projects that currently require FSLR’s equity investment, we believe the risks associated with any delay in such transactions have yet to be understood. Thus, as much as the “old” and “new” bulls have recently restarted the chatter (once again) that FSLR could earn at least $10/share in CY10, we note that there are still major issues that the company has yet to address and that the “bulls” need to incorporate into their models. Simply put, we ask, “What gives FSLR the confidence that it can easily repackage and resell these projects (that have required FSLR’s equity investment) with no delay and/or bottlenecks?” We look forward to further clarification, either on its earnings conference call or on the upcoming analyst day.

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