SunPower Q1 Loss In Line, Sales Up

SunPower Corporation (SPWR - Analyst Report), a Silicon Valley-based manufacturer of high-efficiency solar cells, reported a first quarter 2012 adjusted loss of 23 cents per share, versus earnings per share of 15 cents in the year-ago quarter. However, the figure came in line with the Zacks Consensus Estimate.

On a GAAP basis, the company posted a loss of 67 cents per share versus a loss of 2 cents in the year-ago quarter.

During the quarter, the variation of 44 cents between GAAP and adjusted earnings came from charges related to Utility and power plant project in December 2011 of 15 cents, charges related to restructuring plan of 3 cents, charges related to amortization of intangible assets of 2 cents, acquisition and integration costs of 1 cent, change in European government incentives of 9 cents, non-cash interest expense of 6 cents, a tax effect of 6 cents and a gain on sale of equity interest in unconsolidated investee of 2 cents.

Operational Results

SunPower generated revenues of $580.1 million, up 28.5% year over year. It was also above the Zacks Consensus Estimate by $94.1 million. Total operating expenses during the quarter were $96 million, up 6.8% year over year.

The company was involved in restructuring activities in 2011. As a result of the realignment, the company began reporting on a regional basis beginning this quarter.

During the quarter under review, revenue generated in the Americas was $367.7 million compared with $203.9 million in the prior-year period. Revenues in Europe, the Middle East and Africa (EMEA) were $155.9 million versus $200.5 million in the year-ago quarter. Revenues from Asia-Pacific (APAC) were $56.5 million, up 20.3% year over year.

Financial Condition

At the end of the reported period, SunPower had cash and cash equivalents of $302.1 million, compared with $367.9 million at the end of the first quarter of 2011. Convertible debt increased to $426.9 million from $598.6 million at the end the of prior-year period.

During the quarter, net cash used for operating activities was $136.6 million compared with $174.7 million in the prior-year period. Capital expenditures during the period were $32.8 million versus $44.8 million in the year-ago period.

Guidance

For the second quarter of 2012, the company expects total revenue to be in the range of $575 million to $650 million. For fiscal 2012, the revenue guidance is in a band of $2,600 million and $3,000 million. It expects electricity generation to be in the range of 250MW to 275 MW in the second quarter and in the range of 900MW to 1,200MW in fiscal 2012.

The company expects adjusted loss per share to be in the range of 20 cents to 5 cents in the second quarter of 2012 and GAAP loss per share to be in the range of 95 cents to 80 cents in fiscal 2012.

In addition to investing in cost reduction initiatives, the company expects to generate an unrestricted cash balance of more than $300 million at the end of fiscal 2012.

Our Take

SunPower is a vertically-integrated solar manufacturer, with a presence along the entire solar value chain from cells through installation. However, in the near term, the company is witnessing cascading Average Selling Prices (“ASP”) and margins in its residential and small commercial markets segment. We expect this trend to continue in the near future with valuation further restrained by the higher cost structure of the company compared to its peers, the glut of solar panels in the market, lower ASPs and foreign exchange risk.

The company presently retains a short-term Zacks #3 Rank (Hold). We have a long-term Underperform recommendation on the stock.

The company mainly competes with Suntech Power Holdings Co. Ltd. (STP - Analyst Report).