Energy Conversion Devices Shares Surge Following FY1Q11 Results

Energy conversion Devices

reported FY1Q11 results that were slightly better‐than‐expected. Revenue and shipments were in line but gross margins upside and 1x‐items helped drive an EPS loss of ($0.29) ahead of Hapoalim's ($0.41) estimate. More important, ENER generated operating cash flow of $19m in the quarter, well ahead of its forecast for a ($5m) loss, and FCF of $7m. However, working capital management drove all of the gain; Hapoalim's thesis remains unchanged until ENER can consistently demonstrate an ability to generate sustainable operating cash flow. Despite the operating cash flow upside, continued net losses cannot be ignored. While narrower than the ($23m) loss excluding 1x‐items reported in FY4Q10, ENER generated a net loss (x‐1x items) of ($14m) in the quarter, helping drive tangible book value per share down from $7.09 to $6.45. Hapoalim has a Market Underperform rating and $1.50 PT on ENER. ENER is trading 10% higher at $4.97.