Poor analyst reaction to Vestas' results was hardly unexpected, following as they did on the heels of a profit warning. Gamesa's results were broadly in line with analyst expectations, but this in itself seemed to be a disappointment to many. The analyst community apparently expects Gamesa to continue outperforming its expectations, to give the markets reason to continue the stock's dizzying ascent. The absence of any such catalyst in the first half of the year seems to have left at least some disgruntled. Gamesa's share price performance for the last quarter was noticeably flat.
Meanwhile, Germany's Repower impressed with its international expansion going better than expected. But uncertainty over the fate of its largest shareholder held the stock back, as did concerns about margins. As for struggling Nordex, it saw another tough quarter, with concern about the company continuing, despite its recent restructuring.
News of the ongoing PTC delay in the US, of a potential increase in Spain's wind power target, and the finalisation of wind law amendments in Germany received a mixed reaction and a somewhat muddled response. While Vestas was battered by the US news, Gamesa's growing German market share was applauded, even though it was the same market which analysts were chastising Repower and Nordex about. In the increasingly competitive wind market, one firm's loss is another's gain.
That competition, however, is making analysts ponder whether a "perfect storm" is brewing. Too many competitors chasing the same business, compounded by sluggish demand in certain markets and exacerbated by higher steel prices and lower profit margins threaten to form dark clouds on the horizon. The perceived view is of an increasingly buyer's market, where further consolidation might offer the best hope for profitability.
The analyst community continues to be of two distinct minds about the sector as a whole, with an equal number of "buy" and "sell" recommendations for wind stocks. But 27% of recommendations were still "hold." Unsurprisingly, Gamesa continues to be the sector favourite with 55% "buy" and 18% "sell." All eyes are now inevitably on the second half of the year when most sales of wind turbines occur. The stock market is waiting to see if Vestas can deliver on its post-merger promises and if Gamesa can once again over-deliver.