Why American Superconductor Stock Shocked Investors on Thursday

AMSC isn’t a profitable company yet, but it’s moving in the right direction.

For the second quarter in a row, American Superconductor (AMSC 24.19%) (doing business as AMSC), wowed investors with its earnings report Wednesday afternoon, beating on earnings and raising guidance. On Thursday, its stock rose 22.8% through 10:40 a.m. ET.

Heading into its fiscal fourth quarter of 2023, analysts forecast this specialist in interconnecting renewable power sources with electrical systems would lose $0.02 per share on sales of only $37.1 million. AMSC actually earned a $0.05-per-share profit (well, sort of), and its $42 million in sales eclipsed analyst predictions.

AMSC Q1 earnings

Not all the news was good. It turns out that the $0.05-per-share “profit” that excited analysts was only a pro forma number. When calculated according to generally accepted accounting principles (GAAP), AMSC actually lost $0.05 per share. Despite that quibble, however, AMSC’s Q4 improvement was undeniable.

AMSC posted 32.5% sales growth in the final quarter of its fiscal 2024, with grid revenue rising 21% and wind revenue more than doubling. Yet cost of goods sold grew only 13%, and operating costs were up only 19%, both numbers much lower than the revenue growth.

As a result, gross profits more than doubled, operating losses declined by roughly two-thirds, and net losses slimmed by 80%, to the aforementioned $0.05 per share.

Is AMSC stock a buy?

All that being said, AMSC still ended fiscal 2024 with a loss — just $0.37 per share, versus fiscal 2023’s $1.26-per-share loss, but still a loss. The company also forecast continued losses, and a sequential decline in sales, in fiscal Q1 2024. Management sees sales ranging from $38 million to $42 million this coming quarter, with another $0.05-per-share loss.

That being said, losing $0.05 on $40 million (the midpoint of revenue guidance), instead of losing $0.05 on $42 million (Q4 2023 revenue) speaks to continued improvement in profit margins. AMSC stock may not be a buy yet, but at least it’s moving in the right direction.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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