If you are looking at the revenue and earnings declines at Ormat Technologies (NYSE:ORA) as an ill omen, then you need to look at the results again. Sure, third-quarter results didn't quite stack up to the prior quarter, but the company's more stable, higher-margin business -- electricity generation -- continued to perform well. 

What's even more encouraging is that Ormat's management wants to grow this part of the business significantly in the coming years. Here's a look at the company's most recent results and what management has planned that could make Ormat an exciting stock to follow. 

Geothermal power plant.

Image source: Getty Images.

By the numbers

Metric Q3 2017 Q2 2017 Q3 2016
Revenue $157.2 million $179.4 million $184.6 million
Operating income $44.0 million $53.2 million $48.2 million
Net income $19.2 million $35.0 million $12.1 million
EPS $0.38 $0.69 $0.24

Source: Ormat Technologies earnings release. EPS= Earnings per share.

Ormat's income statement is a tale of two business segments. On the one hand, the company's electricity business continues to grow at a steady rate, while its product business hit a low point this past quarter as several under construction projects were completed. This isn't too much of a big deal because product revenue is a lumpy business where Ormat will have blowout quarters like it did in the first quarter and leaner ones like this.

What's more important is that electricity revenue and gross margins continue to grow. This is a more stable revenue source that, over time, will make the lumpiness of product revenue less noticeable. Electricity revenue increased thanks to better performance from its Hawaii and Guadeloupe plants. Also, Ormat started operations at two geothermal plants -- a 35 Megawatt (MW) facility in Honduras and phase two of a 330 MW facility in Indonesia -- at the end of the quarter. Both should provide another healthy boost to electricity revenue in the fourth quarter, but don't be too surprised if there is a slight slip in gross margins because of start-up costs. 

What management had to say

Ormat has expanded its electric power business at a decent clip in the past couple of years, but there are even more extensive plans in the works. In CEO Isaac Angel's conference call statement, he highlighted some of the various projects it has in the pipeline.

[W]e are in the final stages of site construction of the 24 megawatts Tungsten Mountain geothermal project in Nevada. We expect the project to be online before the end of 2017 and according to commencement our portfolio will reach 800 megawatts. Also in Nevada we are developing the Dixie Meadows project which is in earlier stages of development. Following drilling results we have concluded that injection well should be located in an area which is currently designated as protected land. We are now petitioning for a change in that designation.

We remain on track with our near-term targets with between 150 megawatts and 160 megawatts by the end of 2019 from the third unit of Sarulla in Indonesia our expansion at Olkaria, Kenya the third phase McGinness Hills in Nevada the expansion in Bouillante, Guadeloupe and from other projects that are under various stages of development. We also continued to expand our development inventory and add new prospects to support our future growth.

Earlier in the quarter, Ormat had its analyst day presentation where it laid out its growth plans for the next five years. The company has a 2022 target of 1.15 Gigawatts of geothermal power in its electricity segment. Just for reference, it ended the third quarter with 776 MW of installed capacity. 

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What a Fool believes

Finding faults in Ormat's most recent results is hard. The company has a steadily growing portfolio of geothermal power plants that will provide consistent revenues for years. The consistency of this business makes it that much easier for the company to have uneven results from its product segment. 

Ormat believes that its next big phase of growth will come from energy storage. In the company's investor day presentation, it highlighted the astronomical growth anticipated in battery storage for renewable energy. Ormat wants to tap into this business with a battery storage as a service business. It believes it has a competitive advantage thanks to its geothermal engineering, procurement, and construction business coupled with the recent acquisition of energy software company Viridity Energy.

The proposal sounds like an attractive one, but it's an unproven concept that could go sideways if not efficiently managed. Considering that the company only discussed total addressable market and didn't give a clear plan as to how to monetize this program, it will be worth watching how this part of the business develops.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.