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Why Did SunPower Miss Analysts’ 1Q16 EBITDA Estimates?

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SunPower’s EBITDA by segment

For 1Q16, SunPower (SPWR) reported EBITDA (earnings before interest, tax, depreciation, and amortization) of $6.3 million, which fell far short of the analyst expectation of $11.5 million.

The decrease in EBITDA came primarily from the increase in operating expenses across the company’s segments as well as from a significant drop in the gross margins of the Power Plant segment. As mentioned previously in this series, the gross margin of SunPower’s Power Plant segment came at 6%, as compared with 24% in 1Q15. For 1Q16, the EBITDA from this segment came in at -$8.9 million, as compared with $31.2 million in 1Q15.

Why Did SunPower Miss Analysts' 1Q16 EBITDA Estimates?

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Residential and Commercial segments

According to company filings, pricing pressure on the sale of solar (TAN) power components in Japan (due to a reduction in feed-in tariffs) had a negative impact on SunPower’s 1Q16 margins. As a result, the EBITDA from SunPower’s Residential segment came in at $29.6 million, as compared with $32.6 million in 1Q15.

Regulations such as feed-in-tariff and net metering provide an incentive to go solar. Any change in such regulations can also impact margins of upstream solar companies like First Solar (FSLR), Canadian Solar (CSIQ), and SunEdison (SUNEQ).

For 1Q16, the EBITDA from SunPower’s Commercial segment came in at -$2.4 million, as compared to -$7.0 million in 1Q15. The significant decrease in corporate and unallocated EBITDA resulted in lower overall EBITDA for SunPower in 1Q16.

SunPower’s operating income

SunPower reported an operating loss of $79 million, as compared with the analyst estimate of $76.5 million for 1Q16. This slight increase in operating loss is primarily due to the decrease in gross margins, accompanied by an increase in operating expenses.

For 1Q16, SunPower reported SG&A (sales, general, and administrative) expenses of $98 million, as compared with $77 million in 1Q15. This represents a nearly 27% increase on a year-over-year basis.

Adjusted net income

SunPower’s adjusted net loss widened in 1Q16. For 1Q16, SPWR reported an adjusted net loss of $41.2 million, as compared with the analyst estimated loss of $25.3 million. The increase in adjusted net loss is mainly due to a decrease in income from the company’s ongoing operations.

Now let’s take a look at SunPower’s project pipeline and liquidity position.

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