Vestas Climbs Most Since 2003 After Quarterly Earnings Beat Estimates
Vestas Wind Systems A/S, the largest wind-turbine maker, jumped the most in eight years in Copenhagen trading after second-quarter earnings beat analysts’ estimates and as investors covered short positions.
Vestas advanced as much as 28 percent, the most since March 2003, and traded at 113.4 kroner at 3:25 p.m. local time. The company, whose shares have lost 64 percent in the past year due to falling turbine prices, had reported losses in four of the previous six quarters.
The company is “doing quite well,” Chief Executive Officer Ditlev Engel said today in an interview with Bloomberg Television. Vestas maintained its 2011 revenue forecast of 7 billion euros ($10 billion) with a margin for earnings before interest and tax of about 7 percent. This year’s order intake is expected to be in about 7,000 to 8,000 megawatts.
“These results are a big step in the right direction,” said Gerard Reid, a London-based analyst at Jefferies International Ltd. “The fear was that the company would issue a profit warning as they did this time last year.”
Net income of 55 million euros compared with a net loss of 119 million euros in the year-earlier period, the Randers, Denmark-based company said in a statement. That surpassed the 41.5 million-euro average estimate of 10 analysts surveyed by Bloomberg. Sales rose 36 percent to 1.4 billion euros.
“We are not talking to anybody, we are focused on organic growth,” Engel said when asked about the prospects for consolidation in an industry that’s been buffeted by the European debt crisis and financing issues.
Wind turbine prices are steadying at lower levels after a three-year slump that squeezed margins, Suzlon Energy Ltd., Asia’s third-biggest producer of the machinery, said last month. Vestas had suffered from tougher financing terms for wind-park developers, pricing pressure from Asian competitors and European governments cutting investments amid mounting public debt.
The German turbine maker Nordex SE reported a loss for the second quarter last week and said it will miss this year’s earnings target.
Vestas’s results “are likely to be a relief to the market as comments retaining guidance should be viewed positively against growing street expectations for a profits warning following Nordex disappointment last week,” Rupesh Madlani, an analyst at Barclays Capital, said in a note to investors.
Shares of Vestas were also helped by investors covering short positions, according to Jefferies’ Reid in a note titled “Time to catch the fallen knife.” He has a “Buy” recommendation on the stock.
Short interest in Vestas was 13 percent of shares outstanding as of Aug. 15, according to Data Explorers. That’s more than double the short interest in shares of competitors Gamesa Corporacion Tecnologica SA and Nordex.
The practice of short-selling means that investors borrow stock and sell it, betting it will decline so they can make a profit when they repurchase it.
“We know there’s been some short interest in the stock but we’re focusing on operating Vestas for the long term,” Engel said in a telephone interview.
Today’s share gain trimmed Vestas’s stock loss this year to 36 percent. In comparison, the 64-member Bloomberg Wind Energy Index has dropped 14 percent in 2011.
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