SunEdison (SUNE) Warning Sends Investors Scattering

NEW YORK (TheStreet) -- Semiconductor SunEdison (SUNE) was tumbling during Thursday's trading session after the company projected a soft guidance revision for the fourth quarter. By late morning, shares had fallen 6.7% to $11.93.

The St. Peters, Miss.-based business lowered its revenue forecast for the fourth quarter ending in December to between $205 million and $215 million, down from a previous range of $220 million to $230 million. The forecast is approximately a third of the $672 million in sales the company earned in its third quarter ended September.

"Due to continued market weakness, unit volumes in our semiconductor business are now expected to be below prior expectations for the fourth quarter. Pricing, however, remains approximately flat and we believe our market share remains consistent with the past several quarters," the company said in a statement.

The tech company is expected to release fourth-quarter numbers on Feb. 3.

In a separate announcement, SunEdison said it plans to refinance its capital structure through the offering of $800 million convertible senior notes, half of which are due in 2018 and the remainder in 2021. With the proceeds, it intends to redeem $550 million senior notes due 2019 and repay amounts owed under its $200 million second lien term loan.

In response, UBS reiterated its "buy" rating and 12-month price target of $13. Likewise, Credit Suisse kept an "outperform" rating and target price of $14.

TheStreet Ratings team rates SunEdison Inc as a Hold with a ratings score of C-. The team has this to say about its 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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.9%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, SUNE's share price has jumped by 351.67%, exceeding the performance of the broader market during that same time frame. 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 experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 continued to lose money by earning -65 cents a share vs. -$6.66 a share in the prior year. This year, the market expects an improvement in earnings (-8 cents vs. -65 cents).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 405.8% when compared to the same quarter one year ago, falling from $36.10 million to -$110.40 million.
  • The debt-to-equity ratio is very high at 6.40 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, SUNE maintains a poor quick ratio of 0.71, which illustrates the inability to avoid short-term cash problems.
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