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Ormat Technologies (ORA) Up 0.2% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Ormat Technologies (ORA). Shares have added about 0.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ormat Technologies due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Ormat Technologies Q3 Earnings Miss, Revenues Up Y/Y

Ormat Technologies’ third-quarter 2019 adjusted earnings per share (EPS) came in at 30 cents, which missed the Zacks Consensus Estimate of 33 cents by 9.1%. The bottom line also declined 3.2% from 31 cents registered in the prior-year quarter.

Excluding the one-time impact of its Puna Plant in Hawaii, the company reported GAAP earnings of 35 cents per share compared with 26 cents in the year-ago quarter.

The year-over-year improvement in the bottom line can be attributed to higher revenues as well as operating income generated in the reported quarter.

Revenues

Ormat Technologies’ third-quarter revenues of $170.5 million missed the Zacks Consensus Estimate of $171 million by a whisker. The top line also improved 2.4% on a year-over-year basis, primarily driven by revenue growth at its Electricity segment.

Segment Revenues

Electricity Segment: Revenues at this segment increased 6.1% year over year to $124 million from $116.9 million. The upside was primarily driven by expanded operations at McGuinness Hills and Olkaria. Also, contributions from the USG acquisition boosted this unit’s top line.

Product Segment: Revenues at this segment decreased 11.2%

year over year to $43 million from $48.4 million.

Other Segment: Revenues at this division amounted to $3.5 million compared with $1.2 million in the prior-year quarter.

Operational Update

In the reported quarter, Ormat Technologies’ total cost of revenues was $115 million, down 2.3% year over year.

The company’s total operating expenses were $16.8 million, down 26.7% year over year.

Consequently, operating income rose 49.5% year over year to $38.7 million.

Interest expenses were $20.1 million, up 7.4% year over year.

Financial Condition

Ormat Technologies had cash and cash equivalents of $97.6 million as of Sep 30, 2019, compared with $98.8 million as of Dec 31, 2018.
Total liabilities amounted to $1.75 billion as of Sep 30, 2019, compared with $1.67 billion as of Dec 31, 2018.

2019 Guidance

Ormat Technologies updated its full-year guidance. The company currently expects to generate total revenues in the range of $731-$742 million, compared with the earlier guidance of $720-$742 million. The Zacks Consensus Estimate for the same, pegged at $735.2 million, lies just below the midpoint of the company’s guided range.

Segment-wise, the company currently expects revenues at the Electricity segment to be in the range of $535-$540 million, compared with the prior guidance range of $530-$540 million, excluding any impact from Puna during 2019.

The company’s Product segment revenues are now expected in the range of $185-$190 million, compared with the prior guided range of $180-$190 million.

Furthermore, annual adjusted EBITDA for 2019 is anticipated in the range of $385-$390 million compared with $375-$385 million projected earlier, with no Puna-related EBITDA.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 14.19% due to these changes.

VGM Scores

At this time, Ormat Technologies has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Ormat Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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