WRAPUP 1-SunPower lifts profit view, Evergreen loss widens
Fri Oct 17, 2008 12:15am BST
* SunPower operating earnings top average forecast
* SunPower raises full-year sales, profit outlook
* SunPower says risk spreads wider on solar projects
* Evergreen Solar posts wider net loss on factory costs
* Evergreen needs markets to improve to fund expansion
By Nichola Groom and Matt Daily
LOS ANGELES/NEW YORK, Oct 16 (Reuters) - SunPower Corp (SPWRA.O: Quote, Profile, Research) on Thursday raised its full-year profit forecast slightly after its quarterly net income nearly tripled on strong sales of components for solar power systems, sending its shares up 25 percent.
But smaller solar panel maker Evergreen Solar Inc (ESLR.O: Quote, Profile, Research) reported a wider loss due to higher-than-expected costs for starting up a new plant and its shares slid 16 percent.
Solar power stocks have been pummeled in recent weeks on fears that the global financial crisis will temper demand in the high-flying renewable energy sector.
SunPower's stock is down 61 percent this year, despite Thursday's rally which sent the shares up almost 25 percent to close at $50.99 on the Nasdaq.
The company said it was confident that market demand for clean solar energy would keep growing, particularly thanks to the U.S. government's recent 8-year extension of generous tax breaks for solar power.
"What the market has failed to appreciate... is that we have a very large opportunity in U.S. residential that didn't exist before," said Cowen & Co analyst Rob Stone. "This category of system owner is people who do have access to some kind of financial resource to pay for systems."
SunPower's third-quarter net income rose to $22.4 million, or 26 cents per share, from $8.4 million, or 10 cents per share, a year earlier. Excluding one-time items, the company earned 60 cents a share, above Wall Street analysts' average estimate of 56 cents, according to Reuters Estimates.
Revenue rose 61 percent to $377.5 million, compared with analysts' estimates of $350.4 million.
Wedbush Morgan analyst Al Kaschalk said in a client note that SunPower had benefited from lower costs on its key raw material, polysilicon, and stronger-than-expected sales in its components business, which sells solar products directly to system installers and resellers.
SunPower, based in San Jose, California, said it expected full-year 2008 net income of $2.34 to $2.41 per share, up slightly from the $2.26 to $2.36 it had forecast in July.
Revenue would climb to between $1.44 billion and $1.46 billion from the $1.39 billion to $1.44 billion it had predicted.
EVERGREEN CONTRACTS
Evergreen said its business model and customer base were "fundamentally strong," and announced two new long-term sales contracts with California-based Mainstream Energy Corp and an undisclosed Japanese company.
But if credit markets do not improve in the next nine months, Evergreen will not be able to fund a $400 million production facility it needs to deliver on its 2010 contracts.
"We have almost 9 months for the global economy to improve to levels that will make reasonable financing available," Chief Executive Richard Feldt said on a conference call. "If the improvement is delayed then adding capacity in an unfavorable economic environment is not warranted."
Evergreen stock slid to $3.24 in extended trading after closing at $3.87 in regular trade Thursday on Nasdaq. The shares are down nearly 78 percent this year.
Marlboro, Massachusetts-based Evergreen said its third-quarter net loss was $23.8 million, or 18 cents per share, compared with a loss of $3.7 million, or 4 cents per share, a year ago.
Revenue was $22.1 million, below the company's forecast of $24.5 million to $25.5 million. Gross margins declined significantly -- to 5.7 percent from 34.7 percent in the second quarter -- due to costs for its Devens, Massachusetts factory.
For the fourth quarter, Evergreen forecast revenue of $45 million to $55 million and gross margin of 5 to 10 percent.
FINANCING COSTS
Strong demand for solar and other sources of renewable energy have been a bright spot this year in an otherwise dour U.S. economy. Tighter access to credit, however, has cast somewhat of a shadow over the industry's outlook because the cost of financing solar systems is rising.
"Overall fundamentals to finance solar systems remain in place, though risk spreads have widened," SunPower Chief Executive Tom Werner said on a conference call with analysts.
To offset a potential rise in financing costs for solar systems, SunPower said it was speeding up some cost cutting programs and lowered its capital spending view for 2008 to between $250 million and $300 million from a prior view calling for a flat $300 million.
For 2009, capital expenditures will be about the same as this year, SunPower said.
SunPower is also seeking new financing partners and would consider taking ownership positions, temporarily or permanently, in systems that needed funding, executives said. (Reporting by Matt Daily and Nichola Groom; editing by Tim Dobbyn)
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