Yesterday afternoon, we got the results of SunPower's (Nasdaq: SPWRA) (Nasdaq: SPWRB) investigation into accounting irregularities, alongside fourth-quarter and full-year results.
Whether or not the fudging was foreseeable, the impact on restated financials runs as follows:
- 2008 diluted earnings per share drop to $1.05 from a previously reported $1.09.
- The first three quarters of 2009 take a bigger hit, dropping from $0.35 to $0.24 in EPS.
That latter impact is pretty significant. Even though SunPower says it has a handle on the issue, which arose from ineffective controls over inventory reporting by the firm's Philippines subsidiary, this is not the kind of thing that's easily shrugged off by capital market participants. Nor should it be.
Turning to the fourth quarter, SunPower saw a big lift in revenue, while gross margins ticked down sequentially, to 20.3%. That puts the U.S. company well behind the likes of Trina Solar (NYSE: TSL), at 32.6% for the quarter, and has some analysts fretting.
SunPower's high-efficiency modules have historically commanded premium pricing relative to Chinese solar wares from shops like Canadian Solar (Nasdaq: CSIQ) and Solarfun Power (Nasdaq: SOLF). That premium should remain, but considering its higher cost structure, SunPower's advantage is less evident today. As firms like Yingli Green Energy (NYSE: YGE) and JA Solar (Nasdaq: JASO) ramp up and refine their monocrystalline offerings, life could get even more interesting for the firm.
As for the 2010 outlook, SunPower is projecting sales of $2 billion to $2.25 billion and adjusted earnings of $1.25 to $1.65. If the company comes in at the high end of that guidance, the shares look pretty inexpensive. At the same time, there are plenty of reasons to be skeptical that the company will actually hit this range. Accounting snafu aside, I actually think this is one of the best-run solar shops. I just don't have a great deal of confidence in SunPower's competitive positioning for the year ahead.
