SunEdison Posts Wider-Than-Expected Loss - Analyst Blog

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SunEdison Inc. ( SUNE ) reported second-quarter 2013 adjusted loss per share of 19 cents, which was wider than the Zacks Consensus Estimate of 16 cent loss per share.

The adjusted figure excludes the impact of direct sales and lease-back from the Solar Energy segment as well as some tax benefits and restructuring and impairment charges.

Revenues

On a GAAP basis, SunEdison reported second-quarter revenues of $401.3 million, which nearly halved from $808.4 million in the year-earlier quarter. Reported revenues came much below the Zacks Consensus Estimate of $462.0 million. Lower solar project sales volume and weak semiconductor pricing led to the revenue decrease. Pricing was mostly affected by industry-wide slowdown.

Including direct sales from the Solar Energy segment and lease-back transactions, non-GAAP revenues came in at $491.6 million, which decreased 47.3% from the year-ago quarter.

Segment wise, revenues from Semiconductor Materials grew 2.7% year over year to $239.0 million and was 59.6% of total revenue. Segment revenues were within management's guided range of $235.0-$245.0 million. The year- over-year improvement was mainly due to higher volume offset by weaker pricing, yen headwinds and unfavorable product mix.

The Solar Energy segment (which now includes Solar Materials) accounted for 40.4% of total revenue. The segment generated revenues of $162.3 million, down 71.8% year over year. The decrease was  due to lower project sales, partially offset by better solar wafer sales.

During the quarter, most of the projects were under engineering, planning and construction (EPC) only contract due to lower development spending. This has led to lower revenues from solar project sales.

The Solar Energy segment sold 14 megawatts (MW) of solar energy systems on a GAAP basis and 51 MW on a non-GAAP basis. This compares with 144 MW and 169 MW sold, respectively in the year-ago period. Projects interconnected during the second quarter represented 22 MW in 17 projects. SunEdison also reported that construction of 20 MW of systems is underway. The project pipeline was 2.9 gigawatt (GW), up 218 MW compared with the prior quarter and flat year over year. Project backlog increased 119 MW sequentially to 1.0 GW.

Operating Results

Reported gross profit was $49.2 million, down 45.6% from the year-ago quarter. Gross margin was 12.3% compared with 11.2% in the year-ago quarter. Margin expansion was mostly due to cost control measures, partially offset by lower pricing.

Operating loss was $46.6 million compared with a loss of $15.3 million in the year-earlier quarter. Operating margin was (11.6%) compared with (1.9%) in the year-ago quarter.

Total operating expenses decreased 9.4% from the year-ago quarter with marketing and administration expenses falling 8.6% and research and development expenses decreasing merely 1.1%.

Reported net loss was $102.9 million or 44 cents per share compared with net loss of $77.2 million or 33 cents in the prior-year quarter. Adjusted loss per share was 19 cents compared to earnings per share of 8 cents in the year-ago quarter.

Balance Sheet & Cash Flow

SunEdison ended the quarter with cash, cash equivalents and restricted cash of $482.1 million, up from $476.2 million in the previous quarter. Cash balance grew mainly due to financing activities for solar projects and favorable working capital management. Long-term debt was $755.9 million, slightly down from $757.7 million in the previous quarter.

SunEdison used $86.4 million cash in operations compared with $118.6 million in the preceding quarter. Capital expenditure was $38.8 million, up from $30.8 million in the previous quarter.

Guidance

For the third quarter of 2013, SunEdison expects Semiconductor Materials revenues in the range of $230.0-$250.0 million and non-GAAP solar energy systems sales volume in the range of 60 MW to 100 MW.

Average project pricing would range between $3.25/watt and $3.50/watt. Capital spending is expected between $30.0 million and $40.0 million.

For fiscal 2013, Semiconductor Materials revenues are expected between $940.0 million and $980.0 million (previously $960.0 million and $1.0 billion). Solar energy systems sales volume is expected in the range of 430 MW to 500 MW (retained).

Average project pricing would remain between $3.10/watt and $3.40/watt. Capital spending is still expected between $120.0 million and $140.0 million.

The company also mentioned that it is optimistic about gaining operating leverage from ongoing cost reduction measures. Also, it aims to reduce solar materials pricing with the help of economical and flexible sourcing strategy. Management believes that together these potential benefits would help SunEdison deliver stronger results in 2013.

Conclusion

SunEdison posted a disappointing second quarter with a wider-than-expected loss. Revenues, too, failed to encourage us as it decreased almost 50% on a year-over-year basis. Solar systems sales were also lower than expected. Third quarter guidance was cautious too. But continuous expense control will continue to support results.

Though the Solar segment has not performed well in the last two quarters, we believe there is immense potential given improving backlog and a large project pipeline. We also consider SunEdison's recent tie-up with Brazil's Petrobras, to build one of the largest solar photovoltaic power plants, encouraging. This venture will help SunEdison to tap the Brazilian solar market and expand geographically.

Currently, SunEdison has a Zacks Rank #2 (Buy). Investors may also consider other technology stocks that are performing well. Diodes Inc. ( DIOD ), Rambus Inc. ( RMBS ) and Spreadtrum Communications Inc. ( SPRD ) all have a Zacks Rank #1 (Strong Buy) and are worth buying.



DIODES INC (DIOD): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DIOD , RMBS , SPRD , SUNE

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