SunPower Shows Its Dominance in Solar

A quarter doesn't get much better than what SunPower (NASDAQ: SPWR  ) just reported. Revenue, shipments, earnings, and guidance all beat expectations and, even though the stock is down today, this is a strong sign for this leading solar player.

The numbers
On a GAAP level, second-quarter revenue was $576.5 million with a gross margin of 18.7% and earnings of $0.15 per share. On a non-GAAP basis, which smoothes out lumpy earnings in the systems business, revenue was $650.0 million, gross margin came in at 22.7%, and earnings were $0.45 per share.  

Not only did earnings crush the $0.11 per share analysts expected, it crushed SunPower's own outlook. Below is a table with the company's outlook for Q2 given in May and the results reported yesterday.  


Q2 2013 Non-GAAP Guidance

Q2 2013 Non-GAAP Results 

MW Recognized

260 MW-280 MW

277 MW


$550 million-$600 million

$650.0 million

Gross Margin



Adjusted EBITDA

$30 million-$50 million

$101.3 million




Source: SunPower

Even better was an increased guidance for all of 2013. Management increased non-GAAP gross margin guidance from 15%-17% all the way up to 18%-20% and, if past history is any indication, actual results will be higher than that. Earnings guidance was increased from $0.60-$0.80 up to a range of $1.00-$1.30 per share.

Drivers during the quarter
The U.S. continued to be a strength for SunPower, accounting for 135 MW of the 277 MW recognized during the quarter. Interestingly, residential leases only accounted for 18 MW and cash sales to residential customers were 22 MW. For a comparison, SolarCity (NASDAQ: SCTY  ) expects to install 48-53 MW of solar in Q2 and 250 MW for all of 2013. The difference is that SunPower is also building huge systems projects, which accounted for two-thirds of America's solar shipments, and SolarCity is purely a residential and commercial installer.

The other big driver of earnings is stabilizing or even increasing module sale prices around the world. Europe saw improvement in prices, partly because of tariffs on Chinese solar modules during Q2, and the Japan market continues to be a bright spot for the industry, accounting for 28% of SunPower's shipments and generating a 16.6% gross margin.

Finally, cost reductions are helping improve the bottom line for SunPower. The Oasis system that is being used in utility-scale projects has seen costs fall faster than expected and module costs were down more than expected as well. SunPower doesn't release detailed cost per watt but based on previous comments overall cost per watt is likely at or below $1.00 today.

Foolish bottom line
SunPower's stock dropped 10% today after earnings but for those following the company this is a virtually flawless report. Increased guidance is especially encouraging and management has been great at beating their own expectations so don't be surprised if earnings are more than $1.30 for this year.

The other thing that may drive the company in the long term is capacity expansion. SunPower was capacity-constrained this quarter and management said it'll be constrained for the next 18 months. Analysts prodded about when the company will add capacity. Based on the response from management, it sounds like the company will announce something in the next three months. That could drive SunPower into another growth phase, which is what the company needs now that it's making a profit.  

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Read/Post Comments (3) | Recommend This Article (4)

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  • Report this Comment On August 01, 2013, at 4:16 PM, wpshil78 wrote:

    Wonderful article, Travis. I just hoped you'd mention SPWR's lowered revenue guidance for Q3 2013. That seems to be what is driving the sell-off at the moment. Consensus estimates were for close to $680 million while guidance was more in-line to the recently-reported quarter of $550-600 million...

  • Report this Comment On August 01, 2013, at 4:34 PM, TMFFlushDraw wrote:


    I agree and I couldn't fit everything into this article (more coming in the next few days). What the market doesn't get is that revenue means almost nothing in solar today because it swings wildly quarter to quarter based on systems and geographic mix. Plus, revenue trends should be down because costs and sale prices are falling (which will eventually lead to more volume).

    The bottom line profit is what's most important and long-term I still think that will be the market's focus but short-tery you're right, that's the fixation.

    Travis Hoium

  • Report this Comment On August 01, 2013, at 5:47 PM, wpshil78 wrote:

    Thanks for responding Travis. You've been very vigilent about SPWR for a very long time. I still kick myself for not buying more when it was trading below $10/share.

    The momentum started to turn with the Buffett acquisition and the floating of solar-backed securities, but it was difficult to see a time when the company would post profits like this.

    I especially liked your article about how high you think the stock could go using other tech company comparables. I guess the point is that this sell-off should be viewed as a buying opportunity.

    What I'd also like to ask you is how any future capital expansion will be financed, what new production plants might cost and where they might be located?

    Just to add my 2 cents, I think the earnings calls from First Solar and Solar City next week might be more bad news for the solar industry in the short term. Buying into the November earnings report might be my next move...

    Bill from New Jersey

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SunPower CAPS Rating: ****