NEW YORK (TheStreet) -- Shares of Sunedison (SUNE) are up 0.36% to $22.05 in afternoon trading today as Credit Suisse reiterates its "outperform" rating and $34 price target, while also lowering non-GAAP earnings estimates.
"Growth visibility and transparency [are] improving, [and we] reiterate [our rating]," Credit Suisse said.
Credit Suisse updated their model of the photovoltaic energy solutions provider to reflect the acquisition of the wind energy company First Wind along with recent capital raises and consequently lowers non-GAAP estimates to $(1.49)/(40) cents from 7 cents/62 cents, respectively.
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On Wednesday, Sunedison reported fourth quarter earnings that were in-line with expectations on all important metrics: volumes, profitability, and growth visibility, analysts noted.
"We believe the increased disclosure in the quarter on gross margins for the solar project development business and the upcoming capital markets day will serve as important catalysts as they reduce the complexity in the business to make the cash generation potential clearer," analysts said.
The company completed 383 MWs, an increase of 86% quarter to quarter and an all-time development record, within the range of prior guidance of 335 to 485 and slightly below Credit Suisse's estimate of 430 MWs.
Projects were sold at a "healthy" 22.6% gross margin while retained projects are estimated to generate 20% margins upon ultimate drop-downs, analysts added.
Total solar operating expenses per watt, a key metric to track the operating leverage inherent in the development business, showed continued improvement, declining to 37 cents/watt from the third quarter's 39 cents/watt, analysts concluded.
Separately, TheStreet Ratings team rates SUNEDISON INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate SUNEDISON INC (SUNE) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SUNE's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 10.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 45.05% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- SUNEDISON INC has improved earnings per share by 16.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SUNEDISON INC reported poor results of -$4.42 versus -$2.39 in the prior year. This year, the market expects an improvement in earnings (-$0.75 versus -$4.42).
- The gross profit margin for SUNEDISON INC is currently lower than what is desirable, coming in at 29.07%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, SUNE's net profit margin of -39.67% significantly underperformed when compared to the industry average.
- The debt-to-equity ratio is very high at 4.85 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, SUNE has a quick ratio of 0.54, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: SUNE Ratings Report