Solar Stocks A Top Group, But Earnings Outlook Mixed

By Donna Howell, Investor's Business Daily

IBD's 24-company Energy-Solar industry group ranks No. 2 of 197 tracked ahead of a key earnings report from SunPower (SPWR) after the close Thursday. But performance within the group, up 3% this year through Monday, is very mixed.

Largest name First Solar (FSLR) is down 8% over that span, while the rest of the top five in size are up more than 20% amid a mix of factors. These include investment in big SunPower utility-scale solar projects by mega-investor Warren Buffett's Berkshire Hathaway (BRKA) companies, China's support for its domestic solar industry and solar installer SolarCity (SCTY)'s recent successful IPO. Here was an IBD report on the IPO.

Nineteen companies in the group are up year to date, most by double-digit percentages, while five are down. SunPower's up the most, 39%, after being up more than 2% in early trading Tuesday. Rounding out the top five in market cap, China's Yingli Green Energy (YGE) is up 33% for the year (up 1.4% in early trading Tuesday) and Trina Solar (TSL) 22% (up 1.5% early).

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Analysts polled by Thomson Reuters are looking for fourth quarter 2012 earnings per share of 15 cents from SunPower, down 7.5% from a year ago, on revenue of $768.4 million, up 36%. In its Q3 report, SunPower set fourth-quarter guidance at $700 million to $900 million in revenue, and $2.6 billion to $2.8 billion for the year, with EPS from zero to 25 cents for the quarter and at least above zero for the year.

SunPower designs, manufactures and markets “the highest-efficiency, highest-solar PV energy collection systems in the world today,” said Bob Okunski, SunPower's senior director of investor relations, at a UBS Global Technology Conference for investors in November.

In the last earnings announcement, SunPower CEO Tom Werner called industry conditions difficult. He added that Europe remained “a very challenging market” and that the company was working on cost cuts there and elsewhere.

But SunPower's stock vaulted 48% at the open on Jan. 3 after a unit of Berkshire Hathaway's MidAmerican Energy Holdings Co. said it would buy two utility-scale projects that SunPower will keep building in California's Antelope Valley. At 579 megawatts, it's called the world's largest photovoltaic power development. The total contract price involved is $2 billion to $2.5 billion, according to a SunPower SEC filing.

Then on Jan. 31, SunPower said it would start a new program with U.S. Bancorp (USB) to finance $100 million of residential solar energy panel systems. Like Solarized's leasing arrangements with banks and other companies, SunPower has let homeowners pay zero down through a long-term lease agreement while their power bills are defrayed.

First Solar hasn't set a date to report its Q4 report.

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