Please ensure Javascript is enabled for purposes of website accessibility

Why TPI Composites Stock Crashed 20% This Morning

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.