Research – Broadwind Energy

by Lsigurd on August 23, 2020

I have decided to try out something new for the blog. Instead of just doing my usual posts and company updates on a irregular basis, I am going to start posting what I am researching on a day to day basis. Whatever name I have researched will be posted, likely in point form, as I am basically going to copy and paste my notes from the word document that I am already jotting them down in. We’ll see how this goes. Most of the stocks I will mention will not be one’s that I will buy.

Broadwind Energy

$58mm market cap at $3.44
$32.5mm of debt – they put total debt at $22mm in 10Q, not sure why
precision manufacturer – low margins
manufactures structures, equipment, components for clean tech
72% of revenue comes from wind energy – provides steel towers and adapters to wind turbine manufacturers
have production in Manitowic Wisconsin and Abilene Texas – have combined capacity of 550 towers or 1,650 sections – 1,100 MW of power
gearing segment is gears and gear boxes for a bunch of different industries
also have industrial segment hat supplies combined cycle natgas turbine market
in 2019 they grew revenue 42% yoy
H1 revenue growth came from heavy fabrication
revenue was up pretty decent yoy – from $41mm to $55mm in Q220
it is low margin business with ~10% gross margins
3c EPS in Q220, 9c EPS in H120
they had positive cash flow before WC – around $5mm in H120 – with capex of $900k that is FCF of $4mm in H120
but their own estimate of FCF was -$8.6mm for Q220 because of WC changes
their backlog was down quite a bit $112mm vs $144mm yoy and book to bill was 0.7
here is what they said about backlog being down:

We booked $39,558 in new orders in the second quarter of 2020, down from $104,612 in the second quarter of 2019 driven primarily by a $64,927 decrease in Heavy Fabrication orders as certain tower customers secured production capacity in the prior year in advance of historical lead times due to surging wind tower installation expectations in 2020.

saw weaker orders from mining and construction due to COVID
their Heavy Fab order yoy were down pretty significantly, from $96mm to $31mm
gearing segment down due to lack of orders from O&G
they did say they expect H220 to be similar to H120 so fcf should be strong in H220 – but then said they thought uncertainty from COVID would impact Q420 results
before COVID they did see strong orders – in Q419 they said orders in 2019 were double yoy and book to bill was 1.24 – backlog at YE was $142mm, up 80% yoy
honestly I don’t see why this stock is up so much, free cash seems decent and over the long run wind energy capacity grows but why the stock tripled from the bottom, I’m not sure, seems a little much, maybe why the price has peeled off