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Here's Why TPI Composites Soared in November

By Lee Samaha - Dec 3, 2020 at 9:01AM

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The wind power market is boosting growth prospects at TPI Composites.

What happened

Shares in wind blade manufacturer TPI Composites ( TPIC -2.13% ) soared 21.5% in November according to data provided by S&P Global Market Intelligence. The move comes on the back of an excellent set of third-quarter results released early in the month.

The earnings report impressed for two reasons. First, the company demonstrated excellent operating performance amid continuing to catch up for lost production due to the COVID-19 pandemic. Second, management claimed the company was making progress on the service side of the business and it continues to expand manufacturing lines in order to provide for long-term supply agreements (LTSA).

Wind turbines.

Image source: Getty Images.

As a reminder, TPI Composites is the largest independent manufacturer of composite wind blades in the world and its customers are leading wind power companies such as Vestas, General Electric, Siemens Gamesa, and Nordex.

So what

Digging into the details of the earnings report, net sales were up 23.5% on a year-over-year basis in the third quarter to $474 million and net income flipped to $42.4 million in the quarter from a loss of $4.6 million in the same period last year.

Meanwhile the number of manufacturing lines dedicated to customers under LTSAs expanded to 55 from 52 in the third quarter of 2019. The expansion comes in a year when TPI extended supply agreements with GE, Vestas, and Nordex. As previously discussed, the extensions suggest that the market is moving toward outsourcing blade production as opposed to wind power companies manufacturing in-house -- good news for TPI. 

Now what

It's been a good year for TPI and investors will be hoping for more news on LTSAs in 2021. For reference, management is forecasting $1.64 billion to $1.66 billion in sales in 2020 and has potentially $5.1 billion in revenue from LTSAs through 2024. Meanwhile, management has cited progress on its services business, making that another area to look out for meaningful improvement next year.

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.

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Stocks Mentioned

TPI Composites Stock Quote
TPI Composites
TPIC
$17.00 (-2.13%) $0.37
General Electric Company Stock Quote
General Electric Company
GE
$97.55 (1.60%) $1.54
Vestas Wind Systems Stock Quote
Vestas Wind Systems
VWSY.F
$32.49 (5.49%) $1.69
Nordex SE Stock Quote
Nordex SE
NRDX.F
$16.69 (0.00%) $0.00
Siemens Gamesa Renewable Energy, S.A. Stock Quote
Siemens Gamesa Renewable Energy, S.A.
GCTAF
$24.69 (3.74%) $0.89

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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