SunPower Corp Earnings Cheat Sheet: Margins Suffer as Costs Rise

Increasing costs did not help SunPower Corporation (NASDAQ:SPWRA) in the third quarter as the company reversed to a loss. SunPower is a vertically integrated solar products and services company that designs, manufactures and markets high-performance solar electric power technologies.

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SunPower Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $370.8 million ($3.77 per diluted share) in the quarter. SunPower Corporation had a net income of $20.1 million or 21 cents per share in the year earlier quarter.

Revenue: Rose 28.1% to $705.4 million from the year earlier quarter.

Actual vs. Wall St. Expectations: SPWRA reported adjusted net income of 16 cents per share. By that measure, the company beat the mean analyst estimate of a loss of 6 cents per share. Analysts were expecting revenue of $713.8 million.

Quoting Management: “We executed well in the quarter as we met our third-quarter plan despite a period of rapidly changing market conditions,” said Tom Werner, SunPower president and CEO. “Our diversified channels provided us with the flexibility to reallocate product between business segments and regions. During Q3, we maintained our premium position in our Residential and Commercial (R&C) business while substantially gaining share in Germany and the United States. In our Utility and Power Plants (UPP) business, we completed the construction of both of our Italian power plants by the August 31 deadline and advanced a set of North American power plants through permitting and approvals. We remain focused on our 2011 panel cost reduction roadmap and have commenced production on the first line using our step-reduced cell manufacturing process.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 40.4%, with the biggest boost coming in the fourth quarter of the last fiscal year when revenue rose 71.5% from the year earlier quarter.

Gross margin shrank 9.7 percentage points to 10.8%. The contraction appeared to be driven by increased costs, which rose 43.7% from the year earlier quarter while revenue rose 28.1%.

The company has now beaten estimates the last two quarters. In the second quarter, it topped expectations with a loss of -32 cents versus a mean estimate of a loss of 33 cents per share.

Looking Forward: For next quarter, analysts have a more positive outlook about the company’s expected results. The average estimate for the fourth quarter is 68 cents per share, up from 44 cents ninety days ago. Over the past sixty days, the average estimate for the fiscal year has reached 33 cents abs per share, a decline from 43 cents.

Competitors to Watch: First Solar, Inc. (NASDAQ:FSLR), Suntech Power Hldgs. Co., Ltd. (NYSE:STP), Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE), Evergreen Solar, Inc. (NASDAQ:ESLR), JA Solar Hldgs. Co., Ltd. (NASDAQ:JASO), Trina Solar Limited (NYSE:TSL), Energy Conversion Devices, Inc. (NASDAQ:ENER), Hoku Corporation (NASDAQ:HOKU), Canadian Solar Inc. (NASDAQ:CSIQ), and MEMC Electronic Materials, Inc. (NYSE:WFR).

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(Source: Xignite Financials)