The American-based solar technology company reported quarterly earnings late on Tuesday that were lower than expected, and they downgraded FY25 guidance. While this was not a significant shock given the weakness in the shares leading into the result, with FSLR now trading on just 7x earnings, shares did react negatively. However, they have since recovered a portion of the decline.
The main issue stems from the uncertainties around tariffs and how it will impact their overseas manufacturing roll-out. While they have a large US manufacturing footprint, with plants in Ohio and Alabama, and they’re constructing a new facility in Louisiana, expected to be operational by 2026, they also have operations in Malaysia, Vietnam, and India, along with a recycling facility in Germany. The uncertainty around what tariffs will ultimately look like has impacted their forward guidance.
For 1Q, FSLR reported:
- Net sales $US844.6 million, inline with expectations for $841.1 million
- Earnings Per Share (EPS) $US1.95, below expectations of $2.48
The FY25 guidance was the key, and a wide guidance range implies a variety of potential scenarios on tariffs. They now see net sales for the year of $US4.5 billion to $5.5 billion, down from $US5.3 billion to $5.8 billion, with EPS of $US12.50 to $17.50, down from $17 to $20. This downgrade to guidance reflects tariffs reverting to country-specific levels, resulting in plant closures, i.e. a worst-case scenario at the low end of the range, implying that FSLR are being conservative, as they should be with such a fluid situation.
- We continue to like America’s largest and most established solar module manufacturer and the country’s only fully vertically integrated producer. On a single-digit multiple, this is one stock that could greatly benefit from a more benign tariff outcome.