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SunPower Posts Upbeat Earnings

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SunPower Corp. (SPWR - Free Report) posted third quarter 2013 adjusted earnings per share of 33 cents compared to a loss of 5 cents in the year-ago quarter. Earnings also comfortably surpassed the Zacks Consensus Estimate of 24 cents.

The upbeat results were backed by strong demand for its unique, cost effective, high efficiency products in utility, commercial and residential projects.

GAAP earnings during the quarter were 73 cents per share in contrast with the year-ago GAAP loss of 41 cents per share. The reported GAAP figure includes a gain on utility and power plant projects of 18 cents, a gain on contract termination of 38 cents, stock-based compensation of 11 cents, non-cash interest expense of 11 cents, charges related to restructuring plan of 3 cents and a tax effect of 2 cents.

Operational Results

SunPower generated revenues of $619.5 million, higher than the Zacks Consensus Estimate of $591.0 million. Revenues were up 2.1% year over year.

During the quarter under review, revenues generated in the Americas were $404.4 million compared with $460.1 million in the prior-year period. Revenues in Europe, the Middle East and Africa were $120.7 million, up from $88.5 million in the year-ago quarter. Revenues from the Asia-Pacific were $94.3 million, up from $58 million in the year-ago period.

The company produced 313 megawatts (MW) of energy during the third quarter of 2013.

SunPower’s gross margin for the quarter was 19.1%, up from 14.1% a year ago. Total operating expenses during the quarter were $69.3 million, down 7.4% year over year.

Business Highlights

Driven by strong demand for its products, SunPower announced that it has decided to expand its solar cell manufacturing capacity by more than 25% during the quarter. This expansion will bring the total cell capacity to more than 1.8 gigawatts (GW).

The company entered into an agreement with Shimizu Corp. for the supply of 69 megawatt direct current (MWdc) worth of its solar panels for installation at the Eurus Energy mega solar power plant in Japan.

The company also began initial shipments for 65 MW of projects under a French tender contract, signed $155 million in new residential lease financing capacity with two partners, and signed an agreement with Digital Federal Credit Union for up to $100 million in solar loan financing. Also, the company announced a 70-MWdc merchant power plant in Chile in partnership with Total SA (TOT - Free Report) .

Financial Condition

SunPower at the end of the reported period had cash and cash equivalents of $743.6 million, compared with $457.5 million at the end of 2012. Net cash provided by (used in) operating activities was $28.9 million compared to ($66.2) million in the year-ago quarter.

Guidance Update

For the fourth quarter of 2013, the company expects non-GAAP revenues in the range of $675.0 million to $725.0 million and gross margin in the 17.0% to 19.0% range. SunPower expects earnings per share in the range of 15 cents to 35 cents and electricity to be produced in the range of 300 MW to 330 MW.

For 2013, SunPower expects revenues in the range of $2,520.0 million to $2,570.0 million and gross margin in the 19.0% to 20.0% band. The company expects earnings per share in the range of $1.30 to $1.50. It expects to contribute 1.0GW to 1.3GW of clean energy generation.

Our Take

SunPower Corp.’s top and bottom line succeeded in beating the Zacks Consensus Estimate. Also, revenues and earnings were up year over year. Going forward, with its diversified channel strategy and a strong presence in the residential and commercial markets, the company will continue to maintain its surprise trend.

The company indicated that it remains on track to curtail its operational expenses year over year. The company continues to invest in research and development to improve solar cell efficiency, lower manufacturing costs, reduce wafer thickness, improve throughput, process yield and quality, and to introduce new products that enhance the efficiency and cost-effectiveness of solar power for end-customers.

Given these strong fundamentals, the company currently has a Zacks Rank #1 (Strong Buy). Other solar module manufacturers like ReneSola Ltd. (SOL - Free Report) and Yingli Green Energy Holding Co. Ltd. (YGE - Free Report) also look good with a Zacks Rank #2 (Buy).

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