Investors Take Microturbine Maker’s Stock for Spin

0

After years of losses, could profitability finally be generated by Capstone Turbine Corp., the Chatsworth maker of microturbines?

Last week, investors got bullish after Capstone reported Feb. 11 that it has sliced costs, narrowed its losses and continued to benefit from the global boom in oil and shale gas production.

Shares of Capstone surged 15 percent in three days after earnings were released to close at $1 Feb. 14. The turnaround halted a gradual yearlong slide that saw the stock hit a low of 77 cents late last month.

“While Capstone hasn’t quite proven it can turn a profit, it’s well on its way,” said Tom Sepenzis, an analyst with Northland Capital Markets of Minneapolis who has an “outperform” rating on the stock.

Capstone Chief Executive Darren Jamison told analysts during last week’s earnings conference call that the company is still several quarters away from profitability. Even though gross margins hit 14 percent, more cost-cutting lies ahead. The company still must fill the hole left when European sales plummeted last year because of the continent’s financial crisis.

Capstone’s microturbines – smaller than the turbines used in steam-generating power plants and in most jet engines – burn pressurized gas or liquid fuel to spin the drive shaft of an electric generator. Products range from about the size of a refrigerator, producing 30 kilowatts of power, to about the size of a 40-foot shipping container, producing 1 megawatt.

The company reported a loss of $4.5 million during its third fiscal quarter ended Dec. 31, down from an $8.8 million loss a year ago.

Jamison told analysts last week that Capstone has cut costs on five of 14 components in the microturbine production process and expects an additional 12 percent cost reduction from the remaining nine components during the next several quarters.

Cutting production costs is not just crucial for the balance sheet; Capstone’s microturbines are more expensive than its competitors ($1.4 million vs. $1.1 million for a 1 megawatt unit last year), making it more difficult for the company to compete for new orders in places such as China.

Capstone’s biggest success has come in the booming oil and shale gas production industry. Orders for its microturbines have soared because they can use the natural gas produced on site as fuel, sharply reducing power costs for drilling and fracking equipment. Revenue from the oil and gas sector surged to 66 percent of the $33 million in total revenue for the quarter, up from 36 percent just five years ago.

“It seems a little strange being a clean tech company to have oil and gas be your biggest market,” Jamison said to analysts during the conference call.

Previous article YouTube Networks Partner With Universal Music
Next article Markets Closed Today
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

No posts to display