American Superconductor Offers Outlook - Analyst Blog

Global power technologies company, American Superconductor Corporation (AMSC) has reported losses for fiscal year 2010 ended March 31, 2011, and the first quarter of fiscal year 2011 ended June 30, 2011. The company's fiscal 2010 results include previously announced restatements of results for the second and third quarters of fiscal 2010.

The company has filed its Annual Report on Form 10-K for the year ended March 31, 2011 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 with the Securities and Exchange Commission and, as a result, the company expects to regain compliance with NASDAQ Listing Rules.

In the first quarter of fiscal year 2011 ended June 30, 2011; American Superconductor reported an adjusted loss of 68 cents per share versus the Zacks Consensus Estimate of a loss of 10 cents per share. Earnings in the reported quarter also came below the year-ago adjusted earnings of 28 cents per share.

American Superconductor for the fiscal year 2010 ended March 31, 2011 reported an adjusted loss of 27 cents per share compared with adjusted earnings of 70 cents for fiscal 2009.

Operational Statistics

American Superconductor clocked total revenues of $9.1 million in the first quarter of fiscal year 2011 versus $97.2 million in the year-ago quarter. This is also lower compared to the Zacks Consensus Estimate of $39 million. The decline is due primarily to a lack of revenue from Sinovel Wind Group Co. Ltd, China. Overall American Superconductor reported a net loss for the quarter of $37.7 million. This compares with a net income of $9.2 million for the first quarter of fiscal 2010.

Revenues for fiscal year ending March 31, 2011 dropped to $286.6 million from $316 million for fiscal year ending March 31, 2010. Net loss during the fiscal was $186.3 million versus earnings of $16.2 million in fiscal year ending March 31, 2010. This was due to restatement of results for the second and the third quarters, leading to $158.5 million in aggregate one-time asset write-downs, impairments and accrued charges.

Financial Update

Cash, cash equivalents, marketable securities and restricted cash at June 30, 2011 were $130.9 million versus $123.8 million as of March 31, 2011 and $87.6 million as of March 31, 2010. Cash used in operating activities during the first three months of fiscal 2011 was $57.8 million versus $18.5 million in the year-ago period.

Guidance

American Superconductor for the quarter ending September 30, 2011, expects its revenues to exceed $18 million. The company also expects that its net loss for the aforementioned quarter to be less than $38 million. Overall the company expects to end the quarter with more than $100 million in cash, cash equivalents, marketable securities and restricted cash.

Our Take

American Superconductor offers an array of proprietary technologies and solutions spanning the electric power infrastructure -- from generation to delivery to end-use. American Superconductor is a lead player in megawatt-scale wind turbine designs and electrical control systems.

American Superconductor also offers a host of smart-grid technologies for power grid operators that enhance the reliability, efficiency and capacity of the grid, and seamlessly integrate renewable energy sources into the power infrastructure. These include superconductor power cable systems, grid-level surge protectors and power electronics-based voltage stabilization systems.

American Superconductor's performance was impacted by business and contractual issues with its largest customer in China -- Sinovel. Earlier, American Superconductor's revenue growth largely depended on its customer Sinovel, China's largest and the world's third largest wind turbine manufacturer. However, since April 2011, Sinovel bogged down by high inventory levels refused to accept further shipments from the company. Sinovel also was unable to pay for past shipments worth $56 million.

American Superconductor is currently suing Sinovel for payments for past shipments, and compensation for infringement of intellectual property rights. American Superconductor alleges that Sinovel illegally obtained and used its proprietary technology to upgrade its 1.5 megawatt wind turbines to meet proposed Chinese grid codes.

Consequently, we advise investors not to take any new position over the Neutral-rated American Superconductor stock. In the near-term the Zacks #3 Rank (Hold) for the stock suggests a wait-and-watch stance. However, American Superconductor's Zacks #2 Rank (Buy) peers, like Rogers Corporation (ROG) and Advanced Battery Technologies Inc. (ABAT) look attractive.