With earnings announcements coming fast and thick over the last two weeks, it has been all I can do to keep up, let alone go into detail about the companies I usually follow, as I did with Maxwell Technologies (MXWL) earlier this week. (Note: I am currently long Ameresco and Short Maxwell.)
Rather than remain completely silent, I’m going to attempt to focus on the main take-aways I’ve gleaned from the filings and earnings calls, starting with Ameresco’s (AMRC) potentially confusing earnings.
Ameresco again missed First Call analysts’ average earnings estimates for the fourth quarter in a row, with a loss of 4 cents a share compared to the one cent gain predicted by the First Call consensus. A 23% year-on-year decline in revenues also sent traders running for the hills.
The stock promptly plunged $1 to open at $8 when the market opened on August 8th.
I had a bottom-fishing order in to purchase at $7.75, which I revised to $8.10 later that morning in the hope of scooping up some cheap shares in the panic. Neither executed, because the market quickly caught on to what I’d seen: the headline numbers were hiding a change in management’s outlook for the future.
As in previous quarters, Ameresco’s CEO, George Sakellaris, had attributed the weak results to slow conversion of efficiency projects, due to “a rather protracted disruption in the federal market” but with a big difference this time.
In previous conference calls, Sakellaris had not been willing to provide firm guidance about when he saw conditions improving. This time, he said, “ We believe that several awarded projects appear to be nearing the contracted stage.” He provided revenue guidance of $620 to $640 million for 2013, with income of $18 to $21 million, compared to $631 million in revenue and $18 million in income in 2012 (40 cents a share.)
Although revenue and earnings are likely to be flat for 2013, to achieve Sakellaris’ guidance, revenue for the second half of 2013 will have to be at least $384 million in revenue and $15 million in earnings, which amounts to 17% revenue growth and 25% earnings growth over the second half of 2012.
Rapid second-half growth is also likely to continue into next year, since Ameresco’s pipeline of potential Energy Performance Contracts has been growing even as its sales have slowed. The backlog was up 10% in Q2 year on year, driven by a 22% increase in awarded contracts.
Due to the compelling economics of energy efficiency, the contracts typically result in savings from day one for the customer, and they are often driven by a customer’s need to replace aging equipment. Such projects cannot be delayed forever, so Ameresco has all the pieces in place to return to strong growth in the third quarter, and continue producing growth for a long time to come.
Disclosure: Long AMRC, Short MXWL.
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