Massachusetts-based Evergreen Solar Inc. (ESLR) reported fiscal 2010 first-quarter loss per share of 10 cents, widening the gap by a cent compared to the year-ago quarter. This is also worse than the Zacks Consensus Estimate of an 8 cent loss.

On a reported basis, Evergreen Solar reported a loss of 40 cents per share compared to 12 cents in the year-ago quarter. The fall came from lower average selling prices, due mainly to a stronger U.S. dollar.

Operational Results

Evergreen Solar’s revenues for the first quarter of 2010 were $78.5 million, up 5% compared to fourth quarter of 2009 and up 40.6% year-over-year.

Product sales for the first quarter of 2010 were $78.5 million, as compared to $74.5 million for the fourth quarter of 2009. Unlike $1.4 million in royalty and fee revenues from the year-ago quarter, the company did not register any in the reported quarter.

Evergreen Solar shipped approximately 35.4 megawatts compared to 31.9 megawatts in the fourth quarter of 2009. However, average selling price cascaded to $2.21 per watt from $2.32 per watt in the fourth quarter of 2009.

In the reported period, Evergreen Solar sold approximately 84% of its product in Europe, 14% in U.S. and 2% in Asia compared to approximately 68% of the products in Europe and 32% in U.S. during the fourth quarter of 2009.

Gross margin in the reported quarter was 7.7%, down from 11.9% in the year-ago quarter. Gross margin decreased sequentially due to the decline in selling prices offset partially by increased sales volumes and marginal improvement in manufacturing costs.

The company was able to improve its manufacturing cost per watt to $2.04 from $2.05 in the year-ago quarter. Of this, wafer cost improved to $0.65 per watt compared to $0.69 per watt for the fourth quarter of 2009.

Operating loss for the reported quarter was $14.1 million, compared to $21.1 million for the fourth quarter of 2009. Operating loss in the first quarter of 2010 decreased from the fourth quarter of 2009 based on lower gross profit offset by lower restructuring charges and equipment write-offs. On a year-over-year basis, operating loss improved $45.2 million.

Net loss for the first quarter of 2010 was $23.9 million compared with $98.4 million in the fourth quarter of 2009 and $64.5 million in the year-ago quarter.

Financial Condition

Evergreen Solar used $23.5 million cash for operating activities in the reported quarter, compared with $47.5 million used in the year-ago quarter. Cash and cash equivalents at the end of the reported period was $57.5 million compared with $56.9 million at the end of the year-ago period. Senior convertible notes increased to $326.4 million at the end of the reported period from $323.3 million at fiscal-end 2009.

Outlook

Evergreen Solar’s geographically diversified contractual backlog, ongoing expansion programs and shifting a part of its manufacturing process to China, improving operating efficiencies and up gradation in technology will help maintain its positive momentum. We expect Evergreen Solar to narrow its losses in fiscal 2010 with a loss per share of 33 cents compared to a loss of 53 cents in fiscal 2009.

However, continuing near-term losses due to start-up costs, capital expenditures, apprehension over a subsidy roll-back in Germany and earnings dilutive stock issuances may stunt the near-term share price upside potential.

We maintain our long-term Neutral recommendation on the Zacks #4 Rank (Sell) stock.

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