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Why TPI Composites Stock Crashed 20% This Morning

By Rich Smith - Feb 26, 2021 at 10:00AM

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This isn't the way earnings beats are supposed to work.

What happened

Shares of TPI Composites (TPIC -1.39%), a manufacturer of blades for windmills, peaked above $78 earlier this month, delivering an astounding eightfold return from their early pandemic lows last year as investors bet on a Green New Deal from the Biden administration.

Yesterday, however, TPI reported its actual earnings for last year, and today its stock is spinning in reverse, down 20% as of 10 a.m. EST.

White arrow declining sharply atop a stock tickertape display bathed in red

Image source: Getty Images.

So what

In its fourth-quarter earnings report, delivered last night, it showed $0.14 in EPS and $465.6 million in quarterly sales, easily beating Wall Street's estimates for $0.12 in profit and $450 million in sales. Sales for the quarter grew 10% year over year, and TPI delivered its second-in-a-row GAAP profit after four straight quarters of losses. Ordinarily, this is the kind of news that sends stocks up, not down.  

But while sales grew in the fourth quarter, they grew at a slower pace than TPI enjoyed earlier in the year. Full-year sales growth was 16%. Meanwhile, on the bottom line, the strong fourth-quarter profit wasn't enough to erase losses incurred earlier in the year, and TPI ended 2021 with a $0.52 per share GAAP loss.  

Now what

TPI still sees "strong long-term demand prospects for wind in the U.S. and globally, driven by economics as well as the acceleration of decarbonization initiatives," and says that "the long-term outlook under a Biden administration [is] very supportive and beneficial to renewables and therefore our business."

Updating its guidance for the new year, management did not give a prediction for profits per se, saying only that its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will range from $110 million to $135 million. And TPI says sales will range from $1.75 billion to $1.85 billion, of which about 95% will come from sales of windmill blades. That's roughly in line with what analysts were expecting, but represents just half the growth rate seen in 2020.

If you're looking for a reason TPI is down after beating earnings forecasts, I'd start right there.

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Stocks Mentioned

TPI Composites Stock Quote
TPI Composites
TPIC
$13.47 (-1.39%) $0.19

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