Stock market trading from the Windicator

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Driven by a particularly strong performance from Vestas, the four companies making up the Windpower Monthly share price index outpaced the broader stock market over the last quarter, moving up 14.6% against a 3.3% increase for the FTSE Eurotop index. Vestas' 32.3% increase not only powered the wind index, but it almost brought the value of the Danish company in line with that of Spain's Gamesa (see below).

For Vestas, the last quarter was a tale of two spikes. At the end of March, disappointing 2004 results sent the stock tumbling. At the end of May, the company's new boss, Ditlev Engel, impressed the market with a new strategic vision. With a focus on profitability over market share and an emphasis on candour and transparency, the strategy was well received. Vestas' shares rallied above the DKK 100/share level for the first time in more than a year. Much now rests on the company's ability to transform its bottom line. With news that US fund manager Franklin Resources and its affiliates now own more than 20% of Vestas, investor scrutiny, like the share price, will also reach new heights.

Gamesa ended the quarter up 8.6%, largely on the back of its first quarter results. These were mostly above analyst expectations, helped by the positive impact of applying new accounting standards. As Gamesa repositions itself for international growth, 2005 is being viewed as a transition year for the company. As with Vestas, the market is watching and waiting for changes to the business to be reflected in results.

Repower's share price in the second quarter was slightly down, falling 1.7%, after its first quarter results showed a larger loss than the previous year. A softening domestic market in Germany, compounded by the altering of tax incentives for investment in Germany's "wind funds," has not been helpful. With most of its sales typically occurring in the second half of the year and its latest strategy still in its early days, analysts are waiting to see what happens next (chart). Like Vestas, Repower is flagging a restructuring and cost cutting plan, "REact," as central to its strategy, while as with Gamesa, its sales focus is on diversifying into international markets. Nordex also posted a loss for the quarter, although this was overshadowed by its recapitalisation and associated stock split. The company is certainly better positioned than before, but it remains too early to tell whether a full recovery will be made.

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