American Superconductor Corporation (AMSC) announced its third-quarter fiscal 2010 ending December 31, 2010, earnings of 33 cents per share beating the Zacks Consensus Estimate of 27 cents. Earnings in the reported quarter comfortably beat the year-ago earnings of 12 cents per share.
Operational Statistics
American Superconductor’s total revenue of $114.2 million in the reported quarter was 42% above $80.7 million in the year-ago period and also exceeded the Zacks Consensus Estimate of $113 million. The company registered its sixteenth consecutive quarter of sequential revenue growth in the reported quarter. This growth was primarily driven by higher contribution from its Power Systems segment, which offset lower contribution from the Superconductors segment.
Power Systems segment’s revenue consisted of the bulk of the quarterly revenue (98%) and rose 46% year-over-year to $112.1 million. The upside came from higher sales of wind turbine electronic control systems. However this was partially offset by the Superconductors’ segment which fell 43% to $2.1 million.
American Superconductor’s gross margin for the reported quarter was 40.7% compared to 37.5% in the year-ago quarter. The company generated net income of $16 million compared with net income of $5.2 million in the prior-year quarter.
Financial Update
Cash, cash equivalents, marketable securities and restricted cash at December 31, 2010 were $260.5 million versus $131.2 million as of September 30, 2010 and $155.1 million as of March 31, 2010.
The sequential and year-over-year increase was driven by the company’s November 2010 follow-on offering of 4.6 million shares of its common stock. Cash used in operating activities during the first nine months of fiscal 2010 was $16.3 million versus $1.1 million of cash used in operating activities in the year-ago period.
Guidance
American Superconductor raised its EPS forecast to the range of 99 cents–$1.04 from the earlier guidance range of 95 cents–$1.00. However the company reaffirmed its revenue forecast for fiscal 2010 ending March 31, 2011, to a range of $430 million–$440 million.
Our Take
Devens, Massachusetts-based American Superconductor offers an array of proprietary technologies and solutions spanning the electric power infrastructure, including generation to delivery to end-use. The company is a lead player in megawatt-scale wind turbine designs and electrical control systems.
American Superconductor Corporation is a technology company operating in the two primary markets of wind energy and smart grid infrastructure technology. The company’s growth potential is based on its strong Chinese exposure, and growing international operations.
However, we believe the above positives are already factored in the current valuation of the company. Also the company’s excessive dependence on Sinovel, headwinds in its Superconductor segment, and intense competition in the power system business looms large over its valuation.
American Superconductor’s small customer base has resulted in its order backlog reducing to $883 million as of December 31, 2010, compared with $956 million as of September 30, 2010.
Thus with minimal upside potential, we currently have a short-term Zacks #4 Rank, which translates into a Sell recommendation on the stock. In the near-term we advise investors to bet on the Zacks #1 Rank (Strong Buy) peers like ZAGG Incorporated (ZAGG) and Electrovaya Inc. (EFLVF).
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