CAMP CalAmp Corp

Wind turbine technology company, American Superconductor Corporation (AMSC) reported a loss for its second quarter of fiscal year 2011 ending September 30, 2011. In the reported quarter the company digested a net loss of $1.02 per share, far above the Zacks Consensus Estimate of a loss of 73 cents and the prior year's profit of 17 cents.

Operational Statistics

American Superconductor’s total revenue of $20.8 million in the reported quarter was far lower than $98.1 million in the year-ago period. Also, the quarterly revenue came in below the Zacks Consensus Estimate of $22 million.

The year-over-year decline is due primarily to lack of revenue from the company’s former customer, Sinovel Wind Group Co., Ltd. Wind segment’s revenue was $13.4 million versus $89.3 million in the year-ago period. Grid Segment’s revenue was $7.4 million versus $8.8 million in the year-ago period.

Reported quarterly results included approximately $28.2 million in charges related to the termination of American Superconductor’s proposed acquisition of Finnish rival The Switch Engineering Oy. The transaction was terminated due mainly to funding problems as well as Sinovel litigation expenses and corporate restructuring activities and impairments. Overall the company reported a net loss of $51.71 million compared to the prior year's net income of $7.84 million.

Financial Update

Cash, cash equivalents, marketable securities and restricted cash as on September 30, 2011 were $98.9 million versus $239.9 million as of fiscal year 2010 ending on March 31, 2011. Cash used in operating activities during the first six months of fiscal 2011 was $106.9 million versus $1.9 million of cash used in operating activities in the year-ago period.

Guidance

American Superconductor expects for the third quarter of fiscal year 2011 ending December 31, 2011, its net loss will be less than $30 million or $0.59 per share. The company also anticipated that for the aforementioned period its revenues would exceed $15 million.

Our Take

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

American Superconductor’s performance was impacted by business and contractual issues with its largest customer in China -- Sinovel Wind Group Co. Ltd. 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, its Zacks #5 Rank (Strong Sell) clearly suggests an exit strategy. However, American Superconductor’s Zacks #1 Rank (Strong Buy) peers, like CalAmp Corp. (CAMP) and OSI Systems, Inc. (OSIS) look attractive.

 
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