Solar Earnings Season Warms Up

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After stumbling out of the gate last quarter, SunPower (Nasdaq: SPWRA) (Nasdaq: SPWRB) returned to form last week with another surprisingly sunny solar report. So what does this mean for the slew of solar shops set to report over the next several weeks?

Well, SunPower sports some pretty unique attributes, so I think we need to be careful about extrapolating too much from this sole solar report. For example, scarcely any competitor can come close to matching the firm's deep dealer network. SunPower is also relatively dominant in the United States, having increased its California market share to around 30% this quarter, widening its lead over Sharp, Evergreen Solar (Nasdaq: ESLR), Kyocera (NYSE: KYO), and others. The U.S. market, while still somewhat hamstrung by financing difficulties, is one of the healthiest in the world at present.

You might think the glut of solar wares would chisel away the differentiators between a SunPower and a Canadian Solar (Nasdaq: CSIQ) or a Solarfun Power (Nasdaq: SOLF). That may be somewhat true over the very short term, as everyone races to clear inventory at knockdown prices. But looking forward, it seems that matters of product quality, working capital management, and supply chain relationships will all come to the fore as suppliers exit panic mode. If so, that's a big plus for SunPower, one of the best-run companies in the space.

With utilization of the firm's production lines below 50% during the quarter, SunPower was hardly pushing panels at a healthy clip this quarter. The story for the rest of the group ought to be fairly similar. No one's shooting the lights out, but solar firms' ability to keep the lights on is much less in doubt than a mere four months ago.

For me, there are two key questions at this point: How strong a recovery is now priced in for the back half of 2009, and what are the risks to that outlook? They're questions I hope to return to after these earnings reports have come and gone.

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