SunPower's Bullish Guidance Heats Up Solar Stocks Again

Investor's Business Daily

SunPower announced better-than-expected guidance for the rest of the year, sending market-leading solar shares sharply higher Wednesday.

The No. 2 U.S. solar panel maker sees Q2 revenue of $550 million to $600 million, gross margin of 14%-16%, earnings per share of 5-15 cents, with 260-280 megawatts of solar energy projects recognized. Analysts had expected a 2-cent loss on about $508 million in revenue.

For the full year, SunPower (SPWR) guided to revenue of $2.5 billion to $2.6 billion, gross margin of 15%-17%, EPS of 60-80 cents, 1.0-1.1 gigawatts of solar project recognition and capital expenditures of $60 million to $80 million. Analysts had been looking for EPS of 64 cents on $2.54 billion in revenue.

With the industry struggling to reduce costs amid price wars and changes in government subsidies, and still grappling with supply/demand balance, investors have been looking for positives.

SunPower shares rose 8.5% to 20.65 after vaulting more than 17% intraday. Larger U.S. rival First Solar (FSLR), which gave bullish long-term guidance in April, edged down 1.1%.

Several Chinese players rose 4% or more: Suntech Power (STP), Trina Solar (TSL), JA Solar (JASO) and Yingli Green Energy (YGE) .

"SunPower remains committed to reducing its operational expenses by 10% compared to 2012 and expects to generate free cash flow, including lease financing, in the range of $100 million to $200 million," SunPower said in a statement about its 2013 outlook.

The company expects to double its 2012 installed customer base for SunPower Energy Solutions to 300,000 by 2015, and to increase panel efficiency, among other metrics in its presentation. It sees about 1.5 GW deployed by 2015 vs. about 1 GW in 2012, with the mix shifting to international power plants. For Q2, the midpoint of SunPower's guidance would be up 25% from its actual EPS in Q2 2012, and revenue would be down 12%.

Cowen & Co. analyst Robert Stone said in a note before the announcement that "revenue could take a pause after $325 million of development revenue in Q1," with the wind-down of California Valley Solar Ranch construction, 90% complete in March.

Shining Sector

Solar stocks have been volatile lately, with the Energy-Solar industry group No. 1 in performance as tracked by IBD. Stocks in the group collectively rose 1.9% Wednesday. SolarCity (SCTY), the top U.S. installer of solar panels on home rooftops, lifted more than 2% following a 12% drop Tuesday and a 24% gain Monday ahead of its afternoon earnings report.

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