Thursday, July 26, 2012

Power-One (Nasdaq: PWER) Posts Strong Q2 Results

Power-One (Nasdaq: PWER $4.90) reported second quarter results that exceeded expectations. The company, a leading provider of inverters for photovoltaic arrays, logged revenues of $322 million, up 24% over the same period last year ($260.3 million). Renewable Energy Solutions (“RE”) accounted for $255 million; Power Solutions made up the remaining $67 million.

The majority of sales came in Germany and Italy, where solar installers are working to get as many arrays finished as possible before current feed-in-tariffs are altered or eliminated. Sales in the two countries should remain strong in July and August, but are expected to decline once the new policies take effect in September. Europe accounted for 91% of sales in the second quarter, with 5% in North America and 4% in Asia Pacific (China, India, Australia). Overall, Power-One shipped 1,263 megawatts of inverters in Q2, up 88% sequentially and 76% over last year. 

North American business was hindered by production and distribution foul-ups. The company believes it could have shipped 20% more units in North America had these interruptions not occurred. While customers were understandably upset about the delays (which CEO Richard Thompson called “embarrassing”), these customers expressed satisfaction once their inverters were received. Thompson claims the issues have been fixed, and North American sales will increase in the third and fourth quarters. 

The company is working on a line of microinverters to compete with companies such as Enphase (ENPH). The microinverters, individually attached to each PV panel, compared to a central inverter, are still in beta testing. They could be out as early as the fourth quarter of this year, though. Power-One claims the microinverters will boast an industry-leading 250-300 kW capacity. 

Power-One is still trying to penetrate Japan, but it’s a year or two away. Certification is underway and shouldn’t present problems. Once that’s done, the company will need to find a suitable partner to help generate interest in Japan, traditionally a relationship market. Power-One is currently in talks with several large corporations in Japan, though details are scarce. Sales in Australia are satisfactory, but Chinese shipments have been lower than expected, and financing issues have hindered business in India. Revenues are expected to pick up in China and India, but the company is focusing on Japan for the future. 

The company projected revenues between $240 and $260 million for the third quarter. The main reason for the sequential decline is the expected slowdown in Europe during September. It should go without saying, but economic concerns in Europe could further reduce sales. Regardless, Power-One’s strong second quarter led us to slightly alter our outlook for 2012. If the problems in North America are fixed, those sales should pick up at least some of the slack. We’ve bumped our earnings estimate for 2012 to $.60 per share. The company is anticipating a drastic reduction in sales to Italy in 2013, and reduced revenue from Europe in general. Still, an EPS of $.65 for 2013 is realistic. Power-One’s products are popular, which gives them an advantage if the industry is further impacted by outside factors. 

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