SunPower Earnings Weighed Down by Margin Slide, Soft Outlook

Adjusted results do not include $13.7 million in stock-based compensation and a $700 million gross margin adjustment related to timing of revenue recognition from utility and power plant projects. On a GAAP basis, SunPower posted revenues of $662.7 million and EPS of $0.20.

The sharp 30% drop in year-over-year profit will hamper the share price, as will the drop in margin from 19.1% to 16.7% (non-GAAP). Sequentially gross margin fell by 0.4%. These numbers will worry investors.

For the fourth quarter, SunPower estimates non-GAAP revenues in the range of $575 million to $625 million, gross margin of 19% to 21%, EPS in the range of $0.15 to $0.30 and megawatts recognized of 300 to 340. The consensus estimates call for EPS of $0.30 on revenues of $653.41 million.

For the full 2014 fiscal year, the company’s non-GAAP revenue projection is $2.58 to $2.63 billion, gross margin of 19% to 20%, EPS of $1.25 to $1.40, capital spending of $150 million to $170 million and 1,260 to 1,300 megawatts recognized. Consensus estimates call for EPS of $1.29 on revenues of $2.58 billion.

Non-GAAP estimates do not include a potential timing benefit of approximately $450 million in revenues and $0.90 in EPS related to the real estate accounting treatment of SunPower’s 579-MW Solar Star projects.

The company’s CEO said:

Solar power is increasingly competitive with traditional energy sources in a number of markets, and we are well positioned to capitalize on this large opportunity by virtue of our industry-leading technology, competitive cost structure, substantial project pipeline, and ongoing manufacturing capacity expansion.

The company said it would provide fiscal 2015 guidance at its analyst day presentation in mid-November. SunPower also noted that it added a 10-megawatt expansion agreement to its North American backlog during the quarter and that third-quarter bookings in the North American residential channel rose more than 50% sequentially. Japan accounted for 28% of SunPower’s third-quarter shipments.

SunPower’s shares were up 0.23% in premarket trading, at $30.90 in a 52-week range of $25.38 to $42.07. Thomson Reuters had a consensus analyst price target of around $40.40 before the results were announced.

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