On Mar 21, we maintained our Neutral recommendation on
vertically-integrated solar manufacturer,
), following appraisal of its fourth-quarter results.
Why the Neutral Recommendation?
On Feb 7, 2013, SunPower announced its fourth-quarter 2012
results. Fourth-quarter 2012 adjusted earnings per share
(including stock-based compensation) of 10 cents per share were
in stark contrast to a loss of 21 cents per share incurred in the
year-ago quarter. The reported figure easily exceeded the Zacks
Consensus Estimate of 4 cents per share.
The results were driven by a diversified downstream channel
strategy, solid execution on cost saves and increased customer
demand for high efficiency and industry leading technology. GAAP
loss during the fourth quarter was $1.22 per share, which
included one-time charges of $1.32 per share, wider than the
year-ago GAAP loss of 94 cents per share.
SunPower generated revenues of $678.5 million, lower than the
Zacks Consensus Estimate of $778 million. However, the figure was
higher than the year-ago figure of $625.3 million. During the
quarter, revenues generated in the Americas were $520.2 million
compared with $323.5 million in the prior-year period.
Revenues in Europe, the Middle East and Africa (EMEA) were
$89.4 million versus $248.6 million in the year-ago quarter.
Revenues from Asia-Pacific (APAC) were $68.9 million, up from
$53.2 million in the year-ago period. SunPower's gross margin for
the quarter increased to 18.7% from 11.3% a year ago.
Going forward, for the first quarter of 2013, the company expects
total revenue in the range of $475 million to $550 million.
SunPower expects earnings per share in the range of 5 cents to 20
cents in the first quarter of 2013.
Estimates for full year 2013 and 2014 have remained stagnant over
the past 60 days. The Zacks Consensus Estimate for 2013 remained
at 14 cents while that for 2014 remained at 66 cents.
Accordingly, SunPower carries a Zacks Rank #3 (Hold). In fact the
company has delivered positive earnings surprises in all the past
We are optimistic about SunPower's presence along the entire
solar value chain from cells through installation. Going forward,
we are bullish on the company due to its diversified channel
strategy with a strong presence in the residential and commercial
market, along with its status as a conversion efficiency
The company also has a steadfast focus on spreading its
revenue stream by climbing the solar value chain. SunPower is
largely owned by French oil major
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Over the near term, however, we are apprehensive about the higher
cost structure of the company compared to its peers, the glut of
solar panels in the market, lower Average Selling Prices, subsidy
roll back risk in Europe, rising competition, financial stability
of its customers and foreign exchange risk.
Other Stocks to Consider
Other stocks in the solar industry that are currently performing
well and have a bright outlook include
Canadian Solar Inc.
), both with a Zacks Rank #2 (Buy).