SunPower Beats Estimates, But Solar Sector Still Volatile

SunPower Corp. (SPWRA) reported fourth-quarter EPS of 47 cents (including 3 cents of accounting investigation expense), better than the Zacks Consensus Estimate of 34 cents. However, on a GAAP basis the company reported a quarterly EPS of 9 cents, compared to 20 cents in the third quarter of fiscal 2009.

Operational Results

SunPower generated $548 million of revenue in the reported quarter, compared to $465 million in the third quarter of 2009 and $398 million in the fourth quarter of 2008. The company’s Components and Systems segments accounted for 62% and 38% of quarterly revenue, respectively.

SunPower’s quarterly gross margin on a GAAP basis was 20.3% with an operating income of $43.0 million. In contrast, in the third quarter of 2009, the company’s gross margin was 21.5%, with an operating income of $46.2 million. However, the reported quarterly results include a benefit of $3.6 million, or 3 cents per share, in expenses related to its recently completed accounting investigation.

SunPower, on an adjusted basis, reported a quarterly gross margin of 21.7% with an operating income of $60.3 million. This is lower than the third quarter 2009 adjusted gross margin of 23.1%, with an operating income of $63.8 million.

SunPower in the reported quarter registered a gross margin of 21.5% in the Components segment while the Systems segment clocked a gross margin of 21.9%.

Financial Condition

At fiscal-end 2009, SunPower had cash and cash equivalents of $677.9 million, compared with $232.8 million at fiscal-end 2008. Long-term borrowings increased to $237.7 million at fiscal-end 2009 from $54.6 million at fiscal-end 2008. The company reported $121.3 million in cash from operating activities in fiscal 2009, compared to $154.8 million in fiscal 2008.

Guidance and Estimate Revisions Trend

SunPower in fiscal 2010 expects revenue in the range of $2.00 billion – $2.25 billion with an adjusted EPS of $1.25 – $1.65. This is in line with the Zacks Consensus Estimate of $1.37. Of this SunPower in the first quarter of 2010, expects revenues of $330 million – $350 million with an adjusted EPS of approximately $0.05.

SunPower has witnessed a mixed streak in earnings surprises over the past four quarters. The average is a positive at 28.77%, reflecting the volatility in the solar segment.