SunPower Tops EPS, Lags Sales - Analyst Blog
04 November 2011 - 4:00PM
Zacks
A Silicon Valley-based manufacturer of high-efficiency solar
cells, SunPower Corporation’s (SPWRA) third
quarter 2011 adjusted earnings per share came in at 4 cents, easily
beating the Zacks Consensus Estimate of a loss of 6 cents. However,
earnings were below the year-ago earnings of 26 cents per
share.
The results were driven by effective performance from its
Residential and Commercial (R&C) and Utility and Power Plants
(UPP) businesses. The results also reflect cost reduction efforts
and commencement of production on the first line using step-reduced
cell manufacturing process.
On a reported basis, the company posted a loss of $3.77 per
share versus an EPS of 21 cents in the year-ago quarter.
In the third quarter of 2011, the variation of $3.73 per share
between reported and adjusted earnings came from goodwill and other
intangible asset impairment ($3.56), tax effects (6 cents),
amortization of intangible assets (7 cents), loss on change in
European government incentives (1 cent), non-cash interest expense
(7 cents) and gain on sale of equity interest in unconsolidated
investee of 4 cents.
Operational Results
SunPower generated revenues of $705.4 million, down $7.6 million
from the Zacks Consensus Estimate of $713 million. However, sales
comfortably surpassed the year-ago figure of $550.6 million.
Revenues from ‘Utility and Power Plant’ rose to $324.5 million
from $257.8 million in the prior-year quarter. Revenue from
‘Residential and Commercial’ rose to $380.9 million from $292.8
million in the year-ago quarter.
Financial Condition
SunPower at the end of the reported period had cash and cash
equivalents of $374.6 million, compared with $605.4 million at
fiscal-end 2010. Convertible debt increased to $612.6 million from
$591.9 million at fiscal-end 2010.
Reorganization
The company also announced a reorganization to align its
businesses and cost structure with expected market conditions in
2012 and beyond. The reorganization has been planned keeping in
mind product and technology innovation, increasing process
efficiency and cost reductions.
Effective immediately, as a part of the reorganization, several
long-tenured executives will adjust their areas of responsibility.
Moreover, the company also announced that its Chief Financial
Officer, Dennis Arriola, will be leaving the company in March 2012
and Jim Pape, its President of R&C business, will leave the
company later in November 2011.
The company also expects to implement a company-wide
restructuring program in the fourth quarter of 2011 to accelerate
operating cost reduction and improve overall operating efficiency.
Currently, it expects this program to reduce operating expenses by
approximately 10% in 2012, while growing the company.
Additionally, as a result of the expected restructuring program
under consideration, the company expects to incur a one-time,
pre-tax charge of approximately $10 million due to its
restructuring program which is currently not included in the GAAP
guidance.
Guidance
For fiscal year 2011, the company expects total revenue in the
range of $2.40 billion to $2.45 billion. Capital expenditures are
expected to be in the range of $125 million to $135 million, and
power generation recognized is expected to be in the range of 800
MW to 825 MW.
For the fourth quarter of 2011, the company expects pro forma
earnings to range from a loss per share of 15 cents to an EPS of 10
cents per share. GAAP loss per share is expected to be in the range
of 60 cents to 35 cents in the fourth quarter of 2011.
The company expects pro forma earnings to range from a loss of 5
cents per share to an EPS of 20 cents. Including one-time, pre-tax
charges of $349.8 million related to the impairment of goodwill and
intangibles, pre-tax charges totaling approximately $65.7 million
related to the company's panel reallocation strategy and write-down
of third-party inventory and costs associated with the termination
of third-party cell supply contracts, and pre-tax charges
totaling approximately $14.7 million for expenses related to the
Total tender offer, the company expects GAAP guidance to range from
a loss per share of $5.90 to $5.65.
Outlook
SunPower’s customer base is spread across North America, Europe,
the Middle East, Asia and Australia. The company is also increasing
its global market presence within the residential and commercial
markets by expanding its network of approximately 1,600 dealers.
Additionally, the company is gradually shifting its revenue base
from solar panel sales to developments of solar projects, power
plants and engineering, procurement and construction (EPC) systems.
Earlier in June 2011, oil giant TOTAL S.A. (TOT)
acquired 60.0% of SunPower.
However, its present premium valuation is unwarranted in light
of higher cost structures vis-à-vis its peers, as well as an
oversupply glut of solar panels in the market, subsidy roll back
risk in Europe and rising competition. The company presently
retains a short-term Zacks #3 Rank (Hold) that corresponds with our
long-term Neutral recommendation on the stock. The company mainly
competes with Suntech Power Holdings Co. Ltd.
(STP) that is expected to release its third quarter results on
November 22, 2011.
SUNPOWER CORP-A (SPWRA): Free Stock Analysis Report
SUNTECH PWR HLD (STP): Free Stock Analysis Report
TOTAL FINA SA (TOT): Free Stock Analysis Report
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