Two solar companies, Evergreen Solar (NSDQ: ESLR) and SunPower Corp. (NSDQ: SPWR), saw their shares fall this week after better-than-expected first-quarter earnings failed to overshadow softer-than-expected guidance.
Evergreen Solar’s stock fell 11 percent Friday after the company posted a net loss of $25,000, or 0 cents per share, up from a loss of $6.2 million, or 9 cents per share, a year ago. It’s a drop from a profit of $788,000, or 1 cent per share, for the fourth quarter of 2007. Still it beat analysts’ expectations of a net loss of 7 cents per share on revenues of $21.8 million.
Revenue for the first quarter grew to $22.9 million, up 62 percent from $14.1 million in the year-ago quarter.
But the Marlboro, Mass.-based company disappointed investors with its forecast of second-quarter revenues of between $21.5 million and $22.5 million, including about $4.5 million of selling fees and royalty payments from EverQ, a solar panel joint venture between Evergreen, solar-cell manufacturer Q-Cells and silicon-maker Renewable Energy Corporation (see IN BRIEF: Solar Companies Take Stock).
Prior to the earnings report published after market close Thursday, analysts had said they expected Evergreen to pull in about $21.8 million in sales next quarter.
The company also said Thursday it expects a net loss of $12 million, or 10 cents per share.
"It's a little softer than [investors] expected," said Rick Hanna, an equity analyst for Morningstar.
Wall Street sent Evergreen's shares down Friday $1.17 to close at $9.60 per share.
Still the company’s overall earnings are solid, Hanna said.
"I'm very pleased with its gross margin performance," he said. Evergreen reported that performance to be $7.7 million, or 33.6 percent for the quarter, compared with $2.8 million, or 20.1 percent, a year ago.
In a research note, Jeff Osborne, an analyst for Thomas Weisel Partners, said the better-than-expected earnings hinged on strong sales of scrap silicon and market forces, such as higher-than-expected foreign exchange gains.
Taking a long-term perspective, Hanna said he likes Evergreen and its technology.
Evergreen's approach includes a string ribbon technology, which uses less silicon. Instead of cutting wafers from silicon ingots, the New England company pulls strings through a crucible filled with hot liquid silicon. The process uses surface tension to create a ribbon between the strings and thus saves on silicon.
Efficiency of silicon use in the manufacturing process has become increasingly important as the solar industry battles a shortage of the key material (see Trina Cancels $1B Silicon Plant … Is Shortage Ending?, Silicon Steals the Spotlight, Again, Could China Steal the Solar Throne? and Has Trina Solar Found Its Man?).
The Wall Street reaction was reminiscent of the response to San Jose, Calif.-based solar-manufacturer SunPower‘s results, which included a stock drop of $7.63 per share to close at $86.80 per share Thursday after beating Wall Street analysts' revenue expectations. SunPower’s shares rose $2.53 per share Friday to close at $89.33 per share.
First quarter net income was $12.8 million, or 15 cents per share, compared with $1.2 million, or 2 cents per share, a year ago. Excluding one-time items such as debt and equipment write-offs, SunPower reported an operating income of $39.1 million, or 39 cents per share, compared with analysts’ expectations of 35 cents per share.
Sales rose 92 percent to $273.7 million. Analysts had predicted $245.21 million.
SunPower projected that revenues in the third quarter would remain flat, a prediction that provides the most likely explanation for the drop in share prices, according to a research note from Sanjay Shrestha, a senior analyst at Lazard Capital Markets.
Despite Wall Street’s reaction to both companies’ earnings this week, it’s too early to conclude that solar companies are facing tougher-to-please investors, said Hanna.
"The market for solar power is very manic depressive," he said.