SunPower held its third-quarter 2014 earnings call today (Oct. 29), surpassing all its anticipated results despite a relatively soft margin. The company is different from many solar companies in that it manufactures, sells and installs solar panels in arrays of all sizes, from small home installations to some of the largest solar projects in the world. The results were enough for at least one analyst to reaffirm his outperform rating on the publicly traded company.
"Our third-quarter results reflect another strong quarter of execution, driven by significant demand for both distributed generation and power plant systems," said Tom Werner, SunPower president and CEO. "Solar power is increasingly competitive with traditional energy sources in a number of markets, and we are well positioned to capitalize on this large opportunity.”
“All in, non-GAAP [i.e., generally accepted accounting principles] earnings per share of 30 cents topped our 26 cent and consensus of 24 cent and was towards the high end of the 15 cent to 35 cent guidance range,” wrote Raymond James Analyst Pavel Molchanov in a research note.
“GAAP revenue came in at $663 million, above our $607 million estimate (largely due to sales out of inventory) as well as the high end of the $575-625 million guidance range,” Molchanov said. “GAAP gross margin, on the other hand, was soft: 16.4 percent versus our estimate of 20.7 percent, a function of continuing margin weakness in Europe and Japan (though the latter is showing signs of recovery in 4Q).”
However the analyst firm reaffirmed its outperform rating on the solar company. “As an integrated player across the value chain, SunPower has a solid position in the industry, especially with the balance sheet support provided by Total,” Molchanov said. “We like the fact that operating expense ticked down 3 percent sequentially to the lowest level since the year-ago quarter,” he offered as one of the reasons for reaffirming the company’s ratings on SunPower. The company set $35 as its target price for SunPower stock.
Japan was SunPower’s largest market for distributed generation accounting for 28 percent of its shipments for the quarter,” Werner said. “In the U.S., we continue to balance our residential business between cash and lease transactions against the backdrop of overall strong demand. This allows our customers the choice of a monthly payment model or a long-term ownership, depending on their circumstances and preference. For SunPower, this balance is near-term cash flow generation while maintaining a longer-term retained value stream consistent with our holdco strategy.” He said the company had approximately 25,000 customers with solar leases at the end of the quarter accounting for contracted payments of greater than $750 million.Tweet