Following last quarter's surprisingly sunny report, SunPower (NASDAQ:SPWRA) (NASDAQ:SPWRB) has caught me off-guard once again. It appears I'm not the only one.
After a raft of earnings estimate cuts earlier this week -- by a group of analysts tired of being behind the curve, perhaps -- the solar company went ahead and trounced expectations for the fourth quarter. The revenue line, at $400 million and change, was anticipated, but margins and earnings were surprisingly strong. This follows a preliminary release from Suntech Power (NYSE:STP) that also includes better-than-forecasted results.
SunPower's "A" shares rose significantly today, and the neglected "B" shares -- trading at roughly a 20% discount, despite their superior voting rights -- narrowed that gap somewhat by rising even higher, percentage-wise. The Chipotle (NYSE:CMG) (NYSE:CMG-B) dual-share discount's got nothing on this mispricing.
But that's a story for another day. What exactly is powering SunPower's earnings engine?
Part of the company's advantage is its global dealer network, which I'm not sure I've ever discussed. The dealer base tripled in 2008, giving this company perhaps an unparalleled "on the ground" view of the worldwide solar market. Through this well-diversified channel, SunPower is able to quickly shift resources toward stronger markets. In the fourth quarter, that was the U.S., believe it or not. More than half of the company's revenues came from here.
While tax equity troubles are causing trouble for commercial customers, the U.S. also looks like a big growth driver for 2009 and beyond. In particular, there's huge demand from the utility market, with SunPower actively negotiating more than one gigawatt of projects on top of the work it's already doing for the likes of PG&E and Florida's FPL Group (NYSE:FPL). The increased focus on utilities has ushered in both a new chief financial officer and a realignment of operating segments.
On the power plant/utility front, SunPower will keep going head-to-head against thin-film wunderkind First Solar (NASDAQ:FSLR). Given SunPower's ever-declining silicon consumption -- now down to 5.6 grams/watt -- combined with steady progress in reducing costs in other areas, the company is on solid competitive footing.
SunPower "B" shares appear to be invisible to Motley Fool CAPS participants, with only 50-odd ratings to the "A" shares' 1,500. Looks like an opportunity to me. You can rate the cheaper "B" shares right here.
