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SunPower Earnings Shine, Rooftop Solar Grows

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SunPower Corp. (SPWR) once again registered encouraging results as its first-quarter 2014 adjusted earnings per share of 49 cents comfortably surpassed the Zacks Consensus Estimate of 32 cents by 53.1%. Earnings in the reported quarter were up almost 122.7% from the year-ago adjusted earnings of 22 cents per share. The higher-than-expected earnings evoked a positive market reaction with the shares gaining 1.7% to close at $32.02 yesterday.

The quarterly results were backed by strong demand mainly for its unique, cost effective, high efficiency products in residential projects as well as in the commercial markets where smaller systems generate higher returns.

On a GAAP basis, earnings were 42 cents a share compared with a loss of 46 cents a share in the year-earlier period. The reported number includes gains from a terminated contract and other adjustments.

Total Revenue

SunPower generated non-GAAP revenues of $683.7 million in the reported quarter, higher than the Zacks Consensus Estimate of $655.0 million by 4.4%. Revenues were up 19.0% year over year.

During the quarter under review, revenues generated in the Americas were $471.0 million, down 2.7% from the prior-year period. Revenues in Europe, the Middle East and Africa were $126.3 million, up 83.8% from $68.7 million in the year-ago quarter. Revenues from the Asia-Pacific region were $95.1 million, up 15.1% from $82.7 million in the year-ago period.

Margins & Expenses

SunPower’s gross margin for the quarter was 22.0%, down 70 basis points (“bps”) year over year but up 160 bps sequentially. Total operating expenses during the quarter were $90.2 million, up 8.8% year over year but down 4.0% from the last quarter.

Financial Condition

SunPower exited the first quarter with cash and cash equivalents of $754.7 million, down from $762.5 million at year-end 2013.

In the reported quarter, net cash provided by operating activities was $50.5 million compared with $166.9 million in the first quarter 2013.

Long-term debt was 123.4 million as of Mar 31, 2014 versus $93.1 million as of Dec 31, 2013.


For the second quarter of 2014, the company expects non-GAAP revenues in the range of $575 million to $625 million and gross margin in the 18.0% to 20.0% band. SunPower expects earnings per share in the range of 15 cents to 35 cents and expects to generate 275–300 MW of solar energy.

For 2014, SunPower reaffirmed its top-line expectation in the range of $2.5 billion to $2.65 billion and gross margin in the 19.0% to 21.0% band.

The company boosted its earnings forecast for the year to the range of $1.10–$1.40 per share from its previous expectation of $1.00 to $1.30 per share. It expects to contribute 1.2 gigawatt (:GW) to 1.3 GW of clean energy generation.

The Zacks Consensus Estimate for full-year 2014 earnings is pegged at $1.16 per share on annual revenues of $2.57 billion.

Our Take

SunPower Corp.’s top and bottom line succeeded in beating the Zacks Consensus Estimate in the first quarter of 2014. Going forward, the company is expected to continue with its strong performance on the back of its diversified channel strategy and a strong presence in the residential and commercial markets.

Backed by its strong quarterly earnings and recent partnership with Google Inc. (GOOG), the company is all set to scale new highs. SunPower and Google have teamed up to form a $250 million fund to help homeowners across the U.S. to go solar. This will definitely give a boost to SunPower’s residential leasing program, launched in 2011. Through this program SunPower has gained significant traction in the U.S. solar rooftop installation market.

Residential solar in the U.S. is now a sizzling story. This market even outpaced the commercial and utility segments last year and has already started to attract more conventional electric power companies that produce power mostly from coal and natural gas. SunPower deployed 108 MW of panels for residential projects in the first quarter.

SunPower’s solar cells have one of the highest conversion efficiencies available for the mass market. Higher conversion efficiency has also led to improved silicon utilization. Management also hinted that capacity expansion is on the cards for 2014 to meet rising demand. It has already initiated the construction of a 20-MWac SunPower C7 Tracker (C7) power plant. Its 579-MWac Solar Star projects for MidAmerican Solar is also on schedule with over 170 MW grid connected.

Currently the company holds a Zacks Rank #1 (Strong Buy). Other stocks also worth considering in the solar industry include Canadian Solar Inc. (CSIQ) and ReneSola Ltd. (SOL), each sporting a Zacks Rank #1 (Strong Buy).

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