Why American Superconductor Stock Just Crashed
Key Points
American Superconductor beat on earnings but missed on sales last night.
GAAP profits declined in Q2 and could be cut in half again in Q3.
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American Superconductor (NASDAQ: AMSC) stock got devastated this morning, falling 31.5% through 10:55 a.m. ET after reporting mixed earnings last night.
Heading into the report, analysts forecast the green energy stock (American Superconductor builds control systems for wind turbines, and optimizes power lines for transmitting wind and solar power) would earn $0.15 per share on sales of $67.2 million. AMSC actually beat the earnings prediction with a $0.20 per share fiscal Q2 2025 profit -- but it missed on sales, reporting only $65.9 million.
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American Superconductor's Q2 earnings
The news wasn't all bad. Sales may have missed forecasts, but still grew nearly 21% year over year. On earnings, however, it turns out AMSC's "$0.20" profit was only a non-GAAP number. When calculated according to generally accepted accounting principles (GAAP), AMSC actually earned only $0.11 per share -- and this was down 15% from the $0.13 it earned a year ago.
Still, the sales growth is encouraging. CEO Daniel P. McGahn pointed to "strong order demand across energy and military markets, supported by tailwinds in domestic manufacturing and reliable power needs across key sectors" in predicting stronger sales in Q3 -- $65 million minimum, and perhaps as much as $70 million.
He noted that earnings will only be about $0.05 per share, however, GAAP.
Is American Superconductor stock a sell?
That's less than half the profit from Q2 even with sales probably growing, which doesn't really appeal to me. Also unappealing -- the valuation.
Still priced north of $1.8 billion after today's sell-off, American Superconductor stock costs nearly 120 times trailing earnings. The price-to-free cash flow ratio looks a bit better, but not much better -- about 95 times. But with profits sinking, not rising, that price looks too high for me.
AMSC stock is a sell.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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