Update: Capstone Earnings

| About: Capstone Turbine (CPST)


Capstone had a miserable Q1.

Capstone remains a speculative long-term buy.

Capstone's "lumpy" sales and margin improvement confirmed.

Capstone Turbine (NASDAQ:CPST) had what can only be described as a miserable first fiscal quarter based on the earnings report released after the close on Thursday. Revenue came in at a paltry $23.3 million, down 4.6% from the last year's $24.2 million, and well below some expectations. (It should also be remembered that last year's Q1 broke a string of 23 consecutive quarters of year on year growth.) Margins improved to a record 15% and backlog increased slightly to a record $175.2 million from $171.6 million.

Despite the weak Q1 revenue, Capstone's long term prospects remain solid with the improving margin, large backlog and growing acceptance of its products confirming it as a long term buy. It's not an investment for everyone, although the weakness following a 14% pullback in the share price presents an attractive entry point. As I noted in a prior article following the Q4 results, this is an attractive speculative investment if one is prepared to hold for the long term, but it is subject to erratic performance and inconsistent quarterly revenues.

In that article I also noted the company does not give official guidance. Instead, CEO Darren Jamison tells analysts "the backlog that we entered the year with is a good indicator of what we think we'll do for the year. We don't give specific guidance on a quarterly basis just for this very reason. As you know, we can be lumpy quarter-to-quarter." During the conference call following the release, Jamison again reiterated that the backlog entering the year should still be used as a forecasting guide. Sales were certainly "lumpy" in Q1, and should be much stronger over the next three quarters.

Disclosure: The author is long CPST. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: In addition to a long term investment in CPST, I also actively trade the shares, and added to my position today.