SunPower Surpasses, Trims Outlook

SunPower Corporation (SPWRA - Snapshot Report) has reported third quarter earnings of 28 cents per share, a penny above the Zacks Consensus Estimate of 27 cents. However, the company trimmed its outlook for fiscal 2009. The company revised its revenue guidance for fiscal 2009 to be in the range $1.43 - $1.5 billion from the earlier guidance range of $1.35 - $1.7 billion. Likewise, the company revised its earnings of share (EPS) guidance range for fiscal 2009 to 50 - 60 cents from earlier guidance range of 45 - 90 cents.

SunPower’s top line rose to $466 million in the quarter from $298 million in the second quarter of 2009 and $378 million in the third quarter of 2008. In the reported quarter, its Components and Systems segments generated 64% and 36% of revenues, respectively.

In the reported quarter, SunPower reported GAAP gross margin of 19.1% and operating income of $34.6 million. GAAP net income per share for the reported quarter includes $5.3 million -- or 3 cents per share -- of non-cash interest charges regarding interest expense on convertible bonds. On a non-GAAP basis, the company reported total gross margin of 20.7% on operating income of $52.1 million. Of this, the Components segment non-GAAP gross margin was 23.4% and Systems segment gross margin was 16.0%.

SunPower more than doubled its cash hoard in the quarter through the issue of long-term debt. Sequential cash balance rose to $472.1 million from $202.3 million at year-end fiscal 2008. Long-term debt also rose to $188.9 million from $54.6 million at year-end fiscal 2008.

The results may well be an indication of what’s coming before the big names in the solar space -- Evergreen Solar Inc. (ESLR - Analyst Report) and First Solar Inc. (FSLR - Analyst Report) -- declare their numbers. At present, taking into account SunPower's leadership in cell conversion efficiency and rapidly falling panel manufacturing cost, we believe a premium valuation is justified. Thus we maintain our market Outperform rating on the shares.