Friday, May 25, 2012

2 Solar Companies Headed in Different Directions

Earnings season is upon us and two of the solar industry's largest players have weighed in on how the year has begun. First Solar (NAS: FSLR) and SunPower (NAS: SPWR) seem like they're operating in different worlds. I'll compare the two in a second but let's get to the numbers first.

First Solar struggles
Revenue for the first quarter was $497.1 million at First Solar, down 12% from last year and 25% sequentially. Net loss ballooned to a whopping $449.4 million, or $5.20 per share, on $401.1 million in restructuring charges.

Revenue fluctuates because of the company's power plant sales, but there are two red flags I would like to highlight. Capacity is expected to drop from 2.4 GW in 2011 to below 1.7 GW in 2012. This is due to the previously announced closure of a plant in Germany, but it gives less opportunity for revenue in the future. More importantly, gross margin declined to 15.4%, a third of what it was a year ago. I'll highlight why this is important below.

SunPower steadies
On the other end of the spectrum is SunPower, which can't match First Solar's cost per watt but crushes First Solar in efficiency. The company had revenue of $580.1 million in the quarter and a GAAP loss of $74.5 million, or $0.67 per share. Non-GAAP loss was $13.5 million, or $0.12 per share. Revenue was up from last year and down sequentially, but like First Solar, comparisons in revenue mean very little.

What is important for SunPower is that margins have stabilized and appear to be rising ever so slightly. In the first quarter, non-GAAP gross margins edged up to 12.7% from 11.3% in the previous quarter. GAAP gross margin rose from 6.8% to 9.2%. Management expects further improvement in the second quarter to a GAAP gross margin of 11% to 13%.

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