Shares of SunEdison Inc. SUNE declined more than 25% to a seven-month low after the company posted dismal second-quarter 2015 results. The company incurred loss during the quarter which not only widened from the year-ago quarter figure but also compared unfavorably with the Zacks Consensus Estimate.
Adjusted loss per share of 74 cents was significantly wider than the Zacks Consensus Estimate of a loss of 45 cents. Moreover, on a GAAP basis, SunEdison’s loss per share widened from 16 cents to 93 cents. The unfavorable year-over-year comparison was mainly due to a huge increase in marketing and administration, and interest expenses resulting from higher debt burden.
Though SunEdison’s bottom line was dismal, top line was somewhat decent. The company’s revenues of $455 million came ahead of the Zacks Consensus Estimate of $404 million and marked 5.6% year-over-year improvement.
The company ended the second quarter with a project pipeline of 8.1 gigawatts (GW), 4.9 GW higher year over year and 598 megawatts (MW) sequentially.
The company’s gross profit increased more than twentyfold to $103 million from $5 million a year ago. Gross margin improved to 22.6% from 1.2%.
Despite such a significant rise in gross profit, SunEdison incurred loss mainly due to higher marketing and administration expenses, and financing costs.
The company’s marketing and administration expenses increased 139.8% to $259 million. Moreover, interest expenses increased 57% to $146 million resulting from higher debt burden.
Therefore, the company posted adjusted loss of $216 million or 74 cents per share.
SunEdison exited the quarter with cash and cash equivalents of $1.29 billion compared with $789 million in the previous quarter. Total debt (excluding current portion) increased to $9.17 billion from $7.7 billion at the end of first-quarter 2015.
During the quarter, SunEdison used $621 million of cash for operational activities. Additionally, in the first half of 2015, the company spent $929 million of cash toward operational activities.
Guidance
SunEdison also provided outlook for the third quarter and full-year 2015. The company expects to complete 540 MWs to 600 MWs solar energy systems in the third quarter and 2,100 MWs to 2,300 MWs through 2015.
Conclusion
Although SunEdison reported dismal results in the second quarter, strong energy sales remain a positive.
We believe SunEdison will benefit from the increase in demand for solar energy and the divestment of the semiconductor business, which will enable it to concentrate more on core competencies. Also, the company’s acquisitions and collaborations are likely to drive growth.
Though SunEdison’s growing exposure to the solar energy market is encouraging, project development requires considerable time and investment. Hence, any delay or inability in selling these projects at desired prices could affect liquidity.
Moreover, the pricing environment and a leveraged balance sheet remain the concerns for SunEdison. Competition from SunPower Corp. SPWR and First Solar Inc. FSLR further add to the woes.
Currently, SunEdison has a Zacks Rank #3 (Hold).
Investors may consider Ambarella Inc. AMBA, which carries a Zacks Rank #2 (Buy).
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