WRAPUP 2-First Solar, SunPower results top estimates

Thu Nov 1, 2012 7:33pm EDT

* First Solar cuts revenue outlook, shares fall

* SunPower's posts 3-ct/share profit; analysts expected loss

* First Solar CFO reports lower margins on new projects

By Nichola Groom

LOS ANGELES, Nov 1 (Reuters) - U.S. solar companies First Solar Inc and SunPower Corp reported stronger-than-expected quarterly results as cost cuts and new projects helped offset the impact of weak prices due to a global glut of solar panels.

First Solar, the biggest U.S. solar panel maker, cut its full-year revenue outlook, however, citing disruptions in its supply chain from Hurricane Sandy, and also slashed its operating cash flow view due to potential weather-related project delays and restructuring costs.

The company's shares fell 6 percent after the bell to $23.25 after closing at $24.75 on the Nasdaq.

SunPower, which is majority owned by France's Total SA , reported an unexpected adjusted profit.

The San Jose, California company's revenue from North America rose 36 percent in the third-quarter, helped by large utility projects and an expansion of its residential solar lease program.

Both SunPower and First Solar are developing large solar power plants in the United States that will be powered by their panels, a key difference between them and their Chinese peers.

"This is going to be a terrible quarter for almost every solar company out there besides First Solar and SunPower," said Baird solar analyst Ben Kallo, who added that the two companies "continue to execute on their business because they have this large downstream channel" for the products they manufacture.

Kallo said First Solar's $8.9 billion in expected future revenue, which compared with $9.4 billion at the end of last year, means business for the Tempe, Arizona company is not slowing down as man in the market had feared.

Some, however, questioned the profitability of new project deals in First Solar's pipeline.

"An earnings beat isn't really anything anymore for these guys," said Morningstar analyst Stephen Simko. "It's one thing to have $2 in earnings in a quarter based on projects you signed in 2007. What would earnings be from a quarter filled with (new) projects?"

First Solar's cadmium telluride panels had long been the cheapest in the solar industry, which is dominated by silicon-based panels. But the company's advantage has eroded due to the sharp price declines on traditional silicon panels. Shares of the former Wall Street high flyer have tumbled 90 percent from their 2008 lifetime high.

First Solar Chief Financial Officer Mark Widmar acknowledged on a conference call with analysts that margins were lower on new projects, but was not specific and said demand for the company's panels was strong.

"I don't think there's much mystery about that dynamic occurring in the industry," Widmar said. "The importance of this information was there was a great sense earlier in the year that overall activity levels had collapsed to de minimis levels. And that simply has not been the case."

First Solar cut its operating cash flow view for 2012 to between $650 million and $850 million. Its previous view was $850 million to $950 million.

Chinese panel makers have rapidly ramped up production over the past decade, creating a global glut that sent prices into a tailspin, forcing many European and U.S. solar companies to shut plants and send some into bankruptcy.

Both First Solar and SunPower have taken the ax to costs to improve margins.

SunPower said last month it would idle some solar cell production lines in the Philippines and cut 900 jobs, or 15 percent of its global workforce.

In an interview, SunPower Chief Executive Tom Werner said the company would continue to cut operating costs by reducing hiring in the United States and pulling back investment in certain markets in Europe.

SunPower forecast adjusted fourth-quarter profit of between zero and 25 cents per share on revenue of $700 million to $900 million.

Analysts, on average, were expecting earnings of 11 cents per share, on revenue of $798.96 million, according to Thomson Reuters I/B/E/S.

SunPower reported an adjusted profit of 3 cents per share, confounding expectations for a loss of 11 cents per share.

SunPower shares closed at $4.56 on the Nasdaq after rising 25 cents, or 5.8 percent.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.