SunPower’s positive 2012 results not enough to impress analysts

SunPower's Alamosa projectSunPower, which is producing the most efficient silicon-based photovoltaics on the market today and is building some of the largest PV projects in the world, reported revenue of $2.4 billion for the full-year of 2012, but reported a net loss of $352 million for the year. Overall, the company reported earnings of 18 cents per share on a non-GAAP basis (i.e., using the company’s accounting principles) for the year. The earnings were not enough to assuage at least one analyst on the results who observed, however, that 2013 looks like it could be better for SunPower. Basically it shows the difficulties that solar manufacturers are having in returning to profitability after years of oversupply have impacted them and it shows just how bruising the past two years were for the beleaguered PV manufacturing sector.

In research note following SunPower’s announcement of its financial results Raymond James Equity Research Analyst Pavel Molchanov wrote that the quarter was a disappointment, particularly because of the discrepancy between GAAP and non-GAAP data. “First, we are going to state what should be painfully obvious: SunPower's non-GAAP math has gotten to a point where analyst earnings estimates have become meaningless,” he said. “This quarter is a perfect example of how the accounting has become incomprehensible.”

While the company said it produced non-GAAP earnings per share of 18 cents, on a GAAP basis it produced a loss per share of $1.22 for the quarter. For comparison for the fourth quarter of 2011 it produced a non-GAAP earnings per share of 4 cents and a GAAP loss per share of 94 cents.

Molchanov wrote that the non-GAAP earnings per share ‘beat’ Raymond James’ expectations of 12 cents per share. But that on a GAAP basis all metrics save the company’s gross margin, at 6.9 percent were below expectations. His take wasn’t entirely negative, however. “To be sure, there are some positive aspects of the business model: vertically integrated operations (and thus superior channel visibility), proprietary IP with industry-leading conversion efficiency, and the balance sheet support of having Total as a partner and 66 percent shareholder. None of this, however, negates the razor-thin profitability metrics — even using the company's unique non-GAAP math,” he said. “In the context of our generally negative view on the structurally oversupplied module market, we reiterate our Underperform rating.”

The company did have positive developments during the fourth quarter. “The highlight of the quarter was the sale of our AVSP projects to MidAmerican,” said CEO Tom Werner. “The 250-megawatt CVSR project for NRG remains on track, and we expect to complete this project on schedule by the end of this year. To date, we have installed more than 185 megawatts at this site.”

This year looks to be better for the company as well. “For Q1 2013, we expect to recognize revenue on approximately 150 to 170 megawatts. We see non-GAAP Q1 revenues in the range of $475 million to $550 million, with non-GAAP gross margins projected to be in the range of 18 percent to 22 percent,” Werner said, according to a Seeking Alpha transcript of the earnings call. “On a GAAP basis, we expect revenue of $450 million to $525 million and a gross margin of 3 percent to 7 percent. Non-GAAP earnings per share are projected to be in the range of 5 cents per share to 20 cents per share, with GAAP loss per share of 85 cents per share to 60 cents per share,” he said.

Of 2013, Molchanov said, “On the surface, 2013 sounds like it could be shaping up decently.” But he added that the company’s guidance for revenue, margins and EBITD were all lower than expected. “We are keeping 2014 estimates little-changed, though the bias on our revenue estimate is to the downside,” he said.

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