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SunPower Corporation (SPWR) Shows Its Dominance in Solar

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A quarter doesn’t get much better than what SunPower Corporation
(NASDAQ:SPWR) just reported. Revenue, shipments, earnings, and guidance all beat expectations and, even though the stock is down today, this is a strong sign for this leading solar player.

SunPower Corporation (NASDAQ:SPWR)

The numbers
On a GAAP level, second-quarter revenue was $576.5 million with a gross margin of 18.7% and earnings of $0.15 per share. On a non-GAAP basis, which smoothes out lumpy earnings in the systems business, revenue was $650.0 million, gross margin came in at 22.7%, and earnings were $0.45 per share.

Not only did earnings crush the $0.11 per share analysts expected, it crushed SunPower Corporation (NASDAQ:SPWR)’s own outlook. Below is a table with the company’s outlook for Q2 given in May and the results reported yesterday.

Q2 2013 Non-GAAP Guidance Q2 2013 Non-GAAP Results
MW Recognized 260 MW-280 MW 277 MW
Revenue $550 million-$600 million $650.0 million
Gross Margin 14%-16% 19.5%
Adjusted EBITDA $30 million-$50 million $101.3 million
EPS $0.05-$0.15 $0.45

Source: SunPower

Even better was an increased guidance for all of 2013. Management increased non-GAAP gross margin guidance from 15%-17% all the way up to 18%-20% and, if past history is any indication, actual results will be higher than that. Earnings guidance was increased from $0.60-$0.80 up to a range of $1.00-$1.30 per share.

Drivers during the quarter
The U.S. continued to be a strength for SunPower Corporation (NASDAQ:SPWR), accounting for 135 MW of the 277 MW recognized during the quarter. Interestingly, residential leases only accounted for 18 MW and cash sales to residential customers were 22 MW. For a comparison, SolarCity expects to install 48-53 MW of solar in Q2 and 250 MW for all of 2013. The difference is that SunPower Corporation (NASDAQ:SPWR) is also building huge systems projects, which accounted for two-thirds of America’s solar shipments, and SolarCity is purely a residential and commercial installer.

The other big driver of earnings is stabilizing or even increasing module sale prices around the world. Europe saw improvement in prices, partly because of tariffs on Chinese solar modules during Q2, and the Japan market continues to be a bright spot for the industry, accounting for 28% of SunPower Corporation (NASDAQ:SPWR)’s shipments and generating a 16.6% gross margin.

Finally, cost reductions are helping improve the bottom line for SunPower Corporation (NASDAQ:SPWR). The Oasis system that is being used in utility-scale projects has seen costs fall faster than expected and module costs were down more than expected as well. SunPower doesn’t release detailed cost per watt but based on previous comments overall cost per watt is likely at or below $1.00 today.

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