Stock market trading from the Windicator

Two-thousand-and-three will be remembered as the year of the profit warning which ended with a bang. Throughout the year, wind turbine manufacturers surprised and disappointed with news that the only certainty in their forecasts was they would shortly have to be revised downward again. During the last quarter, profit warnings from Vestas and NEG Micon were poorly received. Both stocks fell sharply, erasing not only the previous gains, but for Vestas, a fair amount of the investor confidence it had been slowly rebuilding during the year. Then in mid-December the two companies announced they are to merge (page 23) -- the full impact of the announcement on the stock market is yet to be seen, but initial reaction has been divided.

One thing though is sure -- analyst sentiment towards the sector has turned far more cautious. A year ago, 13% of analysts polled had "sell" recommendations on the manufacturers. Before the Vestas/NEG Micon merger news, it was 40%. The sector's boom and bust cycle is proving exhausting and the difference of a few orders and timing of key regulatory decisions are still enough to have a significant impact.

Whether investors fully understand the underlying volatility is unclear, but they do expect chief executives be able to better manage expectations and forecast appropriately. The planned DKK 2 billion stock issue by the new Vestas/NEG Micon, as well as the 2004 financial reporting year, will be important tests for the companies.

Not everyone had a rocky 2003 though. Gamesa continues to impress. Its shares are up 49% from January, having risen steadily throughout the year on the back of consistent positive developments. Close to 60% of the analysts following Gamesa rate it a "buy" -- double that of any of the other companies.

The wind sector's performance in the last quarter illustrates the divergent views. Gamesa was up 21%, while the others had sharply negative price performances, each down between 23-35%. The Windpower Monthly share performance index was down 16% for the quarter versus the broader European stock market index, which was up 3% for the same period. Over the whole of 2003, our share price Windicator was down 15%, while the broader market was up 5%.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Windpower Monthly Events


Latest Jobs