SunPower Corporation (SPWR, Financial) is a solar power company that designs, manufactures and delivers solar systems to residential, commercial, and utility-scale power plant customers worldwide. The company offers solar power components, including panels, balance of system components, and inverters for both roof-top and ground installation systems. It also sells inverters manufactured by third parties.
The company declared its first-quarter 2015 results last month. Let’s take a look at the direction in which the company is headed and what it holds for investors, in view of the fact that the demand for solar power is growing at a rapid clip and is expected to grow at a brisk pace going forward.
Looking back
During the first-quarter 2015, SunPower missed the consensus estimates on revenue by around 18% and clocked $430.6 million versus $683.7 million during the year-ago period, representing a year-over-year decline of around 37%. Despite the weak top-line, the shares have gained more than 20% year-to-date, although it has lost around 7% in the last one year.
The increase in operational expenses was primarily on account of research and development, which jumped 26.9% year over year. On the back of weak top-line performance and rising costs, earnings were lower by around 44% than what analysts had expected. Earnings declined from by $0.39 per share in the year-ago quarter to $0.05 per share.
In short, the results missed consensus estimates by a huge margin. However, the company is making right moves in increasing module efficiency, expanding in emerging markets and has some of the best financials among the leading players in the solar energy market.
Despite the weak results, SunPower’s management is very upbeat about the quarter and future prospects ahead, with CEO Tom Werner stating, "Operationally, we achieved record quarterly output at our cell manufacturing facilities in the first quarter and continued to execute against our long-term cost reduction roadmap."
Growth drivers
SunPower’s module efficiency is the highest among the leading solar module manufacturers, reaching mid-20 in terms of efficiency percentages. The company spends substantial money on research and development and it should hold on to the efficiency lead for years to come, with only near-term credible challenge coming only from SolarCity. Module efficiency will add to top- and bottom-line growth going forward both for large-scale and small-scale solar power deployments.
According to a forecast by Navigant Research, the total capacity for DG installed around the world will grow from 87.3 gigawatts in 2014 to 165.5 gigawatts in 2023, and most of this will come from solar power. For example, in distributed generation, SunPower saw a healthy demand in the U.S. and Japan. The North American commercial pipeline continues to grow, and this segment is a significant growth driver going forward.
SunPower is continuing on development of Smart Energy platform through an exclusive commercial partnership with EnerNOC. The comprehensive energy solutions at customer end will lead to greater success for selling solar energy in the future, thus fueling top and bottom line growth.
Expanding international footprint will also be a growth drive going forward. For example, the company dedicated a plant in Chile and expanded footprint in South Africa as it started the construction of Prieska project. Chile has the potential of producing all of the electricity used in the country though solar power. In addition, the company is also focusing on France which it sees as a large growth dive going ahead. In the APAC region, the focus remains on China.
Looking ahead
The company is forming a joint YieldCo vehicle with First Solar (FSLR, Financial). YieldCo will be a publicly traded subsidiary and make it easier for renewable energy companies to raise funds for new projects. This is well on track. As a result SunPower announced that it will provide fiscal 2015 outlook later keeping in vie the impact of the proposed YieldCo vehicle on its expected financial performance.
Final words
SunPower has come a long way from losing half a billion dollars in 2011 to becoming a profitable company that it is now. It is one of the few profitable companies in the solar pv modules market. In addition, with ambitious projections for solar power in India and China, growth of solar power in emerging markets and the company’s presence in all major international market will allow it turnaround from its relatively weak first-quarter performance. I see a good growth for the company in the years ahead.
