As the rest of Wall Street occupies itself with reporting second-quarter 2007 news, dynamic little electric stock American Superconductor (Nasdaq: AMSC) is already off to the races, and reporting on its first quarter of fiscal 2008. The numbers are due out tomorrow morning.
What analysts say:
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Buy, sell, or waffle? Six analysts follow American Superconductor (let's just call it "Super" for short). There are twice as many rating it a buy as rating it a hold.
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Revenues. On average, they expect sales to rise 23% to $17.3 million.
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Earnings. Last year's loss is expected to narrow by a penny to $0.19 per share.
What management says:
The most important thing Super told us this quarter is the following: "Expect dilution" -- and it said that twice. First, the company in July announced a massive secondary offering of stock, facilitated by investment bankers Needham, Jefferies, and Morgan Stanley. The firm floated 4.7 million shares on the market, and gave these underwriters an overallotment option on another 0.7 million. Then, on Tuesday, came the news that Super has approved a new options package for company insiders generally, and its directors in particular. Total dilution from options: 3.3 million shares.
Add it all up, and you've got an additional 8.7 million shares about to float, or already floating -- that's 24% dilution, folks, all announced in the space of one month.
It wasn't all bad news, however. We also learned on Tuesday that Super has found itself a real industry pro to occupy its CFO chair: David Henry -- a veteran of AMIS Holdings (Nasdaq: AMIS) and Fairchild Semiconductor (NYSE: FCS).
What management does:
Super could sure use Henry's help (and investors' cash) to shore up its operations. While rivals such as GE (NYSE: GE), Siemens (NYSE: SI), Rockwell (NYSE: ROK), and DRS (NYSE: DRS) make a profit from their operations, Super still doesn't. Worse, its operating margins appear to be deteriorating.
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Margins
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12/05
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3/06
|
6/06
|
9/06
|
12/06
|
3/06
|
|
Gross
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(4.3%)
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(1.9%)
|
(1.9%)
|
0.8%
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(0.2%)
|
2.1%
|
|
Operating
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(54.9%)
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(52.9%)
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(51.7%)
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(51.5%)
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(58.1%)
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(59.4%)
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Net
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(56.7%)
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(60.7%)
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(60.6%)
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(62.6%)
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(72.3%)
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(66.4%)
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All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
The last time we checked in on Super, CEO Greg Yurek was promising to cut "cash burn" by more than a third this year. Back then, I observed that if it could accomplish this feat, and reduce negative free cash flow to $20 million per year, "Super should have enough cash so that it won't need to tap the public markets with a secondary offering for nearly two years."
Well, take this as good news or bad news as you like, but that no longer seems to be an issue. If Super sells (or already has sold) the 5.4 million shares described in its secondary offering prospectus, it will have another $110 million or so to play with. Add that to the $35 million it had in the bank at last report, and this company can easily afford to continue losing money at last year's rate for another four years.
Fool contributor Rich Smith does not own shares of any company named above. Why do we tell you this? Because The Motley Fool has a disclosure policy.
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