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SunPower (SPWR) Up 13% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for SunPower (SPWR - Free Report) . Shares have added about 13% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is SunPower due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

SunPower Q1 Loss Wider Than Expected, Revenues Up Y/Y

SunPower Corp. incurred adjusted loss of 41 cents per share in first-quarter 2019, wider than the Zacks Consensus Estimate of a loss of 40 cents. The company had incurred a loss of 20 cents per share a year ago.    
Excluding one-time adjustments, the company incurred a GAAP loss of 63 cents per share, narrower than the prior-year quarter’s loss of 83 cents.

Operational Results

During the quarter under review, SunPower’s adjusted revenues came in at $411.6 million, missing the Zacks Consensus Estimate of $425 million by 3%. However, the top line improved 3.2% from the year-ago quarter’s $398.9 million. The reported figure also exceeded the company’s expectation of generating $350-390 million revenues in the first quarter. The year-over-year upside in revenues can be primarily attributed to construction revenues from solar services contracts.

Furthermore, total operating expenses in the quarter declined 44.5% to $80.3 million compared with that in the first quarter of 2018. Notably, lower expenses for impairment of residential lease assets led to the downturn.

Also, a gain from business divestiture caused reduction in operating expenses.

These apart, SunPower made deployment of 455 megawatts (MW) in the first quarter compared with 326 MW deployed in first-quarter 2018.  It also exceeded the company’s expectation to deploy 360-400 MW in the reported quarter.Financial Position

SunPower had cash and cash equivalents of $185.6 million as of Mar 31, 2019, compared with $309.4 million as of Dec 30, 2018.

Long-term debt was $71.6 million as of Mar 31, 2019, compared with $40.5 million as of Dec 31, 2018.

In the first quarter, net cash outflow from operating activities totaled $149 million compared with the year-ago quarter’s figure of $233.3 million.

Outlook

For second-quarter 2019, the company expects to generate adjusted revenues of $420-$460 million. Adjusted gross margin is estimated to be 7-10%. Additionally, it anticipates deployment of 550-600 MW in the same period.

Meanwhile, SunPower still expects to generate adjusted revenues of $1.9-2.0 billion and deploy 1.9-2.1 gigawatts in 2019. However, it has raised adjusted EBITDA projections for the full year from the earlier guidance of $80-$110 million to $90-$100 million.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 45.19% due to these changes.

VGM Scores

Currently, SunPower has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

SunPower has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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