Capstone Earnings Need to Get Into the Black Soon

Capstone Turbine (NASDAQ: CPST  ) will release its quarterly report on Thursday, and the microturbine-maker's stock has climbed to nearly two-year highs on optimism for the company's future. Yet those positive results haven't resulted in Capstone earnings going from losses to profits, and investors are getting impatient for the company to produce the net income they've waited for a long time to see.

Capstone's products allow users to generate power in hard to reach areas, and the company has done an increasingly good job identifying niche areas like out of the way oil and gas drilling sites where access to the power grid isn't available. But will the boom in energy last long enough for Capstone to become profitable? Let's take an early look at what's been happening with Capstone Turbine over the past quarter and what we're likely to see in its quarterly report.

Stats on Capstone Turbine

Analyst EPS Estimate

($0.01)

Year-Ago EPS

($0.03)

Revenue Estimate

$34.28 million

Change From Year-Ago Revenue

19%

Earnings Beats in Past Four Quarters

1

Source: Yahoo! Finance.

How will Capstone earnings fare this quarter?
Analysts have gotten just the tiniest bit more pessimistic about prospects for Capstone earnings in recent months, having kept their June-quarter estimates steady but having cut their full-year 2014 predictions by a penny per share. The stock, though, hasn't hesitated to advance, with a 66% gain just since early May.

Capstone has done a good job lately of increasing its order flow, with a wider variety of customers seeking its microturbine products. Although oil and gas production and distribution companies have been among the most frequent purchasers of Capstone microturbines lately, including deals in April for Chinese and Russian energy companies, Capstone has also attracted attention from business ranging from coal miners to mass transit systems.

Unfortunately, Capstone failed to deliver on its March-quarter earnings prospects when it announced in June. An 18% gain in sales kept the company in a loss position for the quarter, and the slower-than-expected revenue growth send shares down sharply.

One huge threat to Capstone's growth path comes from the big increase in residential solar installations. With SolarCity (NASDAQ: SCTY  ) having pioneered the residential solar space with its innovative financing options, SunPower (NASDAQ: SPWR  ) and other bigger solar players have started paying attention, and the result could be a flood of new home and small-business solar installations. Clearly, solar won't work for all the uses Capstone has identified, but by taking away some of the novelty of Capstone's on-site power generation, SolarCity's and SunPower's success could come at Capstone's expense.

In the Capstone earnings report, watch for the company to detail its latest order prospects. It'll be critical for Capstone to keep growing without revenue hiccups, or else the stock could easily give up all the hard-fought gains it's made in recent months.

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Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On August 06, 2013, at 10:26 AM, mert9 wrote:

    I agree that CPST needs to produce a profit. As a long time shareholder, I've been waiting patiently. However, I think your article gets off track when you introduce the idea that CPST is now competing with solar companies. Solar technology is completely different in the types of markets its serves. CPST produces continuous, clean power day and night, using virtually any type of fuel source. The footprint of CPST systems is very small, compared to solar arrays. A typical application difference can be seen on a offshore rig. Solar takes up way to much space. Concentrated power generation, using well head gas which is being vented anyway, makes sense. Ditto for remote gas fields, some of which are in "dark" locations during seasonal extremes. Roof top installations on skyscrapers is another compact area that CPST excels. While I like and am invested both technologies, to compare the two as poaching on each other is, in my view, silly and overreaching. CPST has its own markets and should be producing a profit, especially considering the growth in revenues over the past several years. The problem is CPST management, and the lack of financial management skills. The guy at the top is a "visionary" who thinks he is saving the world. We need a CEO and a board that views success based on running a profitable business. You would think with all the stock awards management has received that the team would be onboard with increasing stockholder value. Perhaps as they get older and grayer, we will them come to their sense. Management could become fabulously rich by making better financial management decisions. It will happen...perhaps starting with the upcoming quarterly report. In any event, the technology is superb. Markets want it. Which is way I continue to be patient.

  • Report this Comment On August 06, 2013, at 3:31 PM, Teacherman1 wrote:

    Since I am in CPST at $0.85, I am content to hold and wait.

    I would hold SCTY too, if I were in it at $15-$20, which is what I think it is currently worth.

    Like TESLA, it is very over priced on unrealistic future earning expectations. I think some have confused the desire to own the car, with owning the stock.

    JMO and worth exactly what I am charging for it.

  • Report this Comment On August 06, 2013, at 8:49 PM, bottomfisherman wrote:

    Some of my research on Capstone have been to look at past and present employee reviews. Many are negative on management, their style and decisions. Some speak of production waste, down time, starting one project and reallocating resources for another, etc. They really do have a great product hopefully management is not holding them back from achieving greatness.

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