SunPower (SPWR) To Cuts Jobs Under Restructuring Initiative

SunPower Corp. (NASDAQ:SPWR) has disclosed a restructuring plan to successfully counter the challenges posed by the tough market conditions and position the company for a sustainable growth over the long term

Implementation of the Initiative

The company will close the 700-megawatt (MW) Fab 2 facility as part of this plan in a bid to survive the declining solar prices.

The move came within five months of the company’s announcement of a plan to lay off 1,200 workers, or about 15% of its workforce. Further,the company willlay off 25% of its workforce, or 2,500 employees, to reduce operating expenses in 2017 to less than $350 million.

Note that Sunpower plans to reduce 2016 inventory levels to improve its working capital and balance sheet. The plan includes a reduction of more than 50% in capital spending for 2017.

Restructuring Charges & Benefits

The recently announced move will result in GAAP restructuring charges of at least $150 million in the fourth quarter of 2016 and $75–$125 million in 2017.

Thanks to the restricting moves, the company expects to generate positive cash flow from operations in 2017 and exit the period with $300 million in cash, with revenues of $2.1 to $2.6 billion.

These initiatives will allow the company to witness strong profits despite the current economic challenges. It will facilitate continued investment in next-generation cell and module technology as well as complete solutions.

Further, the company will remain focused on maximizing its cash flow to aid the funding of its strategic plans.

Price Movement

SunPower has underperformed the Zacks categorized Solar Market industry. The company’s current rate of return is a decline of 65.5%, compared to the industry’s decline of 48.9% over the last 12 months.

The solar industry is expected to continue experiencing market dislocation in the near term, which will directly impact SunPower’s fourth-quarter 2016 and 2017 financial performance. The current disparity between supply and demand has been hampering global panel average selling prices (ASPs). In the third quarter, reported ASPs were down approximately 25% driven by panel manufacturers’ liquidation of excess inventory. Though these price reductions are not expected to continue at the existing rate, the panel price environment will remain challenging in 2017.

Zacks Rank & Key Picks

SunPower carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the solar industry include Sunrun Inc. (NASDAQ:RUN) , Vivint Solar, Inc. (NYSE:VSLR) and Canadian Solar Inc. (NASDAQ:CSIQ) .

Sunrundelivered an average positive earnings surprise of 134.71% in the trailing four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vivint Solarrecorded an average positive earnings surprise of 8.98% in the trailing three quarters. The company has a Zacks Rank #2 (Buy).

Canadian Solar, another Zacks Rank # stock2, recorded an average positive earnings surprise of 73.66% in the trailing four quarters.

Zacks’ Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

]Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>