08.05.08, 8:15 PM ET
American Superconductor achieved positive operating cash flow for the first time, but the recent sharp rise in the money-losing company's share price ironically contributed to a wider than expected loss in the first quarter.
The maker of wind turbine components also lowered its 2008 guidance.
The company posted a net loss of $6.1 million, or 15 cents a share, down from a net loss of $9.7 million, or 27 cents a share, in the prior year, missing analysts’ forecasts of a loss of 6 cents a share before special items. The results include a noncash charge of $2.4 million, or 6 cents a share, for a mark-to-market adjustment on an outstanding warrant driven by the increase in the company's stock price during the quarter.
Revenue rose to $39.8 million, but still fell below analysts’ estimates of $40.1 million.
Raymond James analyst Pavel Molchanov said that although there was a lot of noise in the quarter related to the non-cash charges, he is optimistic on the company given its move toward profitability and the strong growth in the wind industry.
Revenue doubled to $35.9 million from the company’s power systems unit, which sells wind products. The wind industry is attractive for investors because the price for generating electricity from wind turbines is one of the cheapest renewable energies out there. With the price of coal and natural gas soaring, demand for wind turbines is skyrocketing.
Having latched onto a big customer in China's Sinovel Wind, American Superconductor is keen to expand sales in the rapidly growing country. It said that China's installed base of wind power capacity grew more than 130.0% in 2007, to approximately 6.1 gigawatts. It could exceed 120 gigawatts by 2020, according to the Global Wind Energy Council's Global Wind 2007 Report.
Revenue from its superconductors segment fell about 28.0%, to $3.9 million.
“Revenue in this particular segment is not only difficult to predict because it can be lumpy based on the rate of revenue booking under a R&D contract, but it is also a very small portion of the total company’s revenue,” Molchanov said.
The company now expects a net loss of $13.0 million to $15.0 million for the 2008 fiscal year, or 30 cents to 35 cents a share, up from its previous forecast of a net loss of 21 cents to 28 cents.
Nonetheless it increased its revenue outlook for the fiscal year by $10.0 million, to a range of $175 million to $185 million.
Analysts were expecting a loss of 21 cents a share, before special items, on sales of $176.2 million.
There was a silver lining to the dark cloud hanging over American Superconductor’s first-quarter.
The company reported that its backlog increased significantly, to $634.0 million in the first-quarter, up from $73.0 million, in the prior year. Another bright spot on the horizon is that the company received a $450.0 million order from China’s Sinovel Wind for its wind turbine core electrical components, which means it will see continued growth through calendar year 2011. For the three-year pact, that one order accounts for more annual revenue than American Superconductor had last year. (See “American Superconductor Catches Updraft”)
Molchanov believes the stock is oversold and that investors should buy on the weakness. He has a $45 price target.
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