SunPower stumbles after fourth quarter earnings but promises 2013 efficiencies
Mixed first quarter guidance and flat revenue projections for 2013 sent shares of SunPower Corp. (NASDAQ: SPWR) tumbling in trading Friday.
But despite experiencing its eighth consecutive losing quarter to close out 2012, the San Jose solar energy company was optimistic about its expanding global presence and improved panel efficiencies.
In a conference call Thursday afternoon, SunPower, the country’s largest provider of residential and commercial solar power systems, reported a net loss of $144.8 million in the fourth quarter of 2012, or $1.22 per diluted share. Over the same period in 2011, it posted a loss of $93 million, or 94 cents per share.
Excluding one-time acquisition, compensation and restructuring charges totaling almost $180 million, among them a $20 million settlement for a class-action lawsuit over accounting discrepancies, SunPower reported an adjusted income of $58.7 million, or 18 cents per diluted share. This beat analyst predictions of 15 cents and was an improvement over the fourth quarter of 2011, when the company had an adjusted loss of $5.1 million.
Speaking with analysts, SunPower Chief Executive Officer Tom Werner attributed these gains to a growth in residential leasing and a strong emerging market in Japan, and pointed to them as a roadmap for the company’s future.
The leasing program, which has attracted 14,000 customers since its launch 18 months ago, buoyed SunPower in the North American residential solar sector in 2012. That sector has struggled in recent years due to cuts in government subsidies and a glut of cheap Chinese panels that have flooded the market.
“Leasing is driving the transition from hardware sales to an energy services model,” Werner said on the call. “This process is furthest along in North America, but we expect similar trends to play out internationally.”
He emphasized the company’s presence in Japan, where demand for solar energy is rapidly increasing. SunPower currently holds a 10 percent market share, which it hopes to expand by partnering with established companies like Toshiba.
SunPower still faces challenges in Europe, where it posted significant losses in the fourth quarter. The company has been expanding its presence in the region since French oil giant Total acquired a majority stake in SunPower in 2011, but the economic crisis has killed many subsidies that previously helped solar energy take off in countries like Germany and Italy.
Chuck Boynton, the Chief Financial Officer, said SunPower remains committed to the European market and expects to return to profitability there by the second half of 2013 as it restructures.
Overall, revenue in the fourth quarter of 2012 grew 8.5 percent year-over-year, to $678.5 million from $625.2 million.
Sales for the year were up 1.8 percent over 2011, to $2.42 billion from $2.3 billion. SunPower still operated at a loss of $352 million, or $3.01 per share, in 2012, but it was considerably better than 2011, when the company lost over $600 million, or $6.28 per share. The company reported adjusted year-end earnings of 18 cents per share, compared to 16 cents per share for 2011.
Looking ahead, Werner said revenues would likely remain flat in 2013, but several major utilities projects could provide long-term growth in the second half of the year and beyond. The recent sale of the Antelope Valley Solar Project in southern California to Warren Buffett’s MidAmerican Energy Company is expected to bring in more than $2 billion by its completion at the end of 2015.
SunPower executives also highlighted significant cost reduction efforts, which could boost profitability even as solar prices continue to fall. Product improvements drove down operating expenses by 25 percent in 2012 and the company said it hopes to reduce them by another 10 percent in 2013.
“Our cost reductions are driven as much by innovation as they are from supply-chain efficiencies,” Werner said on the call. “Things like that, we think, have a more sustainable competitive differentiation.”
Analyst Rob Stone from Cowen and Company said this bodes well for the company moving forward.
“If there was a negative barricade on SunPower, it was always that efficiency upgrades would cost too much,” he said. “The margins being higher than expected, even by their own guidance, was a good thing.”
At the close of the market on Thursday, SunPower’s stock was trading at $8.40. It fell 4.17 percent in after-hours trading. At Friday’s close, shares of SunPower were down 47 cents, or 5.6 percent, to $7.93.
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