SunPower Corporation (SPWR) reported second-quarter 2014 adjusted earnings per share of 22 cents, missing the Zacks Consensus Estimate by 5 cents. Earnings declined 48% year over year but were within the company’s guidance of 15 to 35 cents.
Lower revenues from Americas and Europe, the Middle East and Africa accounted for the underperformance. Nonetheless, the company witnesses strong demand for its high-efficiency solutions across all geographical regions and end channels.
Including one-time charges, net income came in at 9 cents per share, significantly lower than 42 cents earned in the year-ago quarter.
Shares of SunPower lost 5.1% in the after-market trade reflecting the weak quarterly performance.
Operational Results
SunPower generated revenues of $621.1 million, declining 4.4% year over year. Revenues however surpassed the Zacks Consensus Estimate of $602 million and were near the high end of the guidance of $575–$625 million.
During the quarter under review, revenues generated in the Americas were $333 million, down 29% year over year. Revenues in Europe, the Middle East and Africa were $64.7 million, down 49 % year over year. Revenues from Asia-Pacific were $110.1 million, down 15.8% year over year.
The company produced 311 megawatts (MW) of energy, up from 296 MW of energy in the year-ago quarter.
SunPower’s gross margin contracted 250 basis points to 19.5%. Total operating expenses declined 3% year over year to $87.4 million.
Adjusted operating income of $6.7 million declined significantly from $72.8 million in the year-ago quarter.
Financial Condition
SunPower exited the quarter with cash and cash equivalents of $980.9 million, up from $762.5 million at the end of 2013. Its strong liquidity will continue to support holdco strategy and build Fab 4.
Long-term debt increased to $157 million from $93 million at 2013 end.
Net cash used in operating activities was $132 million in the quarter, comparing unfavorably with cash provided by operating activities of $50.4 million in the year-ago quarter.
Capital expenditure of $11.5 million increased from $8.8 million in the year-ago quarter.
Free cash outflow was $117.6 million against free cash inflow of $96 6 million in the year-ago quarter.
Guidance
For the third quarter of 2014, the company expects non-GAAP revenues in the range of $600–650 million. Gross margin is estimated between 17% and 19%. SunPower expects earnings per share in the range of 15 cents to 35 cents and electricity production in the range of 325 MW to 360 MW. Capital expenditures are expected in the range of $30–$40 million.
The company reiterated its guidance for 2014. The forecast is $2.50 billion to $2.65 billion for revenues, 19% to 21% for gross margin and $1.10 to $1.40 for earnings per share. SunPower expects to contribute 1.225 GW to 1.300 GW of clean energy generation but incur capital expenditure between $150 million and $170 million.
Zacks Rank
SunPower currently carries a Zacks Rank #3 (Hold). Better-ranked solar stocks include JinkoSolar Holding Co., Ltd. (JKS), First Solar, Inc. (FSLR) and Yingli Green Energy Holding Co. Ltd. (YGE). While JinkoSolar and First Solar sport a Zacks Rank #1 (Strong Buy), Yingli Green Energy carries a Zacks Rank #2 (Buy).
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