Capstone Turbine's Make-or-Break Moment Is Here

On Thursday, Capstone Turbine (CPST 13.61%) will release its latest quarterly results. But lately, investors have already anticipated some huge results from the company, having bid the shares up by about 50% in just the past several weeks. Can Capstone deliver on what investors want to see?

For years, Capstone Turbine has struggled to make its innovative microturbine power systems business more commercially viable, with losses continually plaguing the company and investors suffering repeated disappointments. Will this time bring a happier ending to longtime shareholders? 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

Source: Yahoo! Finance.

Can Capstone Turbine power up its earnings this quarter?
For their part, analysts haven't budged in recent months on their views of Capstone's earnings, keeping their estimates for both the March quarter and the 2014 fiscal year unchanged. The stock, though, has vaulted higher, with gains of about 30% since early March.

Capstone has had huge potential for a long time, even if it hasn't delivered on that potential. The company's microturbines have tapped into the trend toward on-site power generation, and its flexible-fuel equipment makes it a more viable option for smaller projects that the larger generators that giants General Electric (GE +6.68%) and Caterpillar (CAT +2.47%) have developed. GE and Caterpillar aim instead for high-efficiency products and have done an excellent job of delivering, with Caterpillar's power-generation equipment reaching 96% efficiency ratings. But Capstone's solutions are better for residential and smaller commercial customers.

Over the past few months, though, Capstone has made progress toward its long-term mission to become profitable. In late February, CONSOL Energy (CNX 3.87%) installed one of its microturbines at a gas processing plant, taking coal-bed methane from the plant itself to provide power and generate electricity from waste gas, leading to net benefits in electricity production for CONSOL. Then in April, Capstone did multiple deals, with three orders from the Chinese oil and gas sector to supply power for exploration and production activity, as well an order from a Russian pipeline project and another for electric buses in Denver. Further orders in May have kept the excitement rising for the stock, demonstrating its increasing ability to get attention from customers for a variety of different applications.

What Capstone really needs to demonstrate is its ability to keep ramping up revenue. Expected sales gains of around 20% this year and next are fairly strong, but with all the activity in many of the industries best suited for its products, Capstone really needs to accelerate that demand.

In Capstone's report, watch closely for guidance on whether the company can deliver that needed revenue boost. Reaching critical sales mass will be essential for Capstone to reach profitability and build a sustainable business.

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