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First Solar Sticks to 2014 Forecast as Profit Plunges

First Solar Inc., the largest U.S. solar manufacturer, fells short of second-quarter earnings estimates by 88 percent on delays in completing some solar farms.

It beat estimates by even more last quarter, and the delayed revenue this quarter may help it exceed estimates for the current period.

The fluctuating quarterly numbers highlight the challenge of a business model that’s based on receiving large payments at irregular intervals, Chief Executive Officer Jim Hughes said on a conference call today.

“When you’re dealing with these large projects, it’s not always easy to predict timing,” Hughes said on the call.

The deferred revenue from the second quarter won’t affect full-year profit, Hughes said. He maintained his forecast for earnings of $2.40 to $2.80 a share for the year.

Net income for the quarter plunged 87 percent to $4.5 million, or 4 cents a share, from $33.6 million, or 37 cents, a year earlier, Tempe, Arizona-based First Solar said today in a statement. That fell short of the 32-cent average of 12 analysts’ estimates compiled by Bloomberg.

Revenue increased 4.7 percent to $544.4 million, less than the $796 million analysts were expecting.

Deferred Earnings

First Solar cited project delays that led to “deferring some earnings” until later this year. That included issues with the inverters at its 550-megawatt Desert Sunlight power plant in Southern California.

“It manifested itself only when the plant came up to full power,” Chief Financial Officer Mark Widmar said on the call. “It’s not something we’re particularly alarmed by. It just requires some engineering time.”

First Solar builds large solar farms, mainly for utilities, and recognizes revenue at irregular periods. The company’s sales for the third quarter of last year almost doubled when it added about half the revenue from Desert Sunlight to its balance sheet.

Net income in the first quarter of this year was more than double estimates after the company recognized revenue from its 139-megawatt Campo Verde project in California. First Solar sold it in April 2013 to Southern Co. and Ted Turner’s clean-power company Turner Renewable Energy LLC.

The company added 800 megawatts of new power-plant orders in the second quarter, including its 250-megawatt Silver State South and 50-megawatt Macho Springs projects. Terms for those deals weren’t disclosed.

“This was one of the best periods for bookings,” Ben Kallo, an analyst at Robert W. Baird & Co., said on the conference call. He has the equivalent of a buy rating on the shares.

“The opportunities pipeline has grown,” Hughes said. “It’s beginning to translate to orders.”

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