Time To Buy Solar ETFs? [Guggenheim Solar ETF, First Solar, Inc., SolarCity Corp]

solarSolar stocks and the related ETFs, which enjoyed a surge in 2013, have seen rough trading since the start of April on valuation concerns, resulting in a broad sell-off. This trend seems to continue despite strong first quarter results from the U.S. solar-panel manufacturer behemoth – First Solar (NASDAQ:FSLR).

SolarCity (NASDAQ:SCTY), the largest U.S. residential solar installer, also joined the league of earnings outperformers on May 7 after market close. The company surpassed the Zacks Consensus Estimate on both bottom and top lines.

Investors should carefully watch whether the strong results from these solar companies fuel a rally in the solar industry.

First Solar Earnings in Focus

The largest U.S. solar manufacturer reported earnings per share of $1.10, crushing the Zacks Consensus Estimate of 50 cents and improving nearly 67% from the year-ago earnings. Revenues climbed 26% year over year to $950.2 million and was well ahead our estimate of $840.0 million. The incredible performance was mainly attributed to robust revenues from Campo Verde project in Imperial County.

For 2014, First Solar raised its earnings per share guidance from $2.20–$2.60 from $2.40–$2.80. This is well above the Zacks Consensus Estimate of $2.45, suggesting optimism in the company’s future growth story. The company also increased its operating income guidance to $290–$340 million from $270–$320 million and expects operating margin of 17–18%.

Big earnings beat as well as encouraging guidance failed to keep the shares of this thin-film solar PV maker away from the selling territory. The stock tumbled about 5.75% in yesterday’s trading session after falling 1.4% on Wednesday (read: Short the Nasdaq with These Inverse ETFs).

Solar City Earnings in Focus

Adjusted loss per share sharply narrowed to 26 cents from 54 cents in the year-ago quarter and bettered the Zacks Consensus Estimate of a loss of 73 cents. Revenue more than doubled to $63.5 million and strongly surpassed of our estimate of $52 million.

Robust performances were credited to a huge level of panel installations and rising lease revenues. The company installed 82 megawatts (MW) of solar panels during the quarter, bolstered by a 107% year-over-year increase in residential demand.  

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