Is Broadwind Energy Inc (BWEN) Blowing Hot Air at Investors? FAN, VWDRY & MY

Small cap wind stock Broadwind Energy Inc (NASDAQ: BWEN) is up 203.7% since the start of the year, but investors might want to contain their excitement when they look closer at the stock and consider its long term performance along with the performance of other wind investments like First Trust Global Wind Energy ETF (NYSEARCA: FAN) and wind energy stocks Vestas Wind Systems (OTCMKTS: VWDRY) and China Ming Yang Wind Power Group Ltd (NYSE: MY) to see whether BWEN is just blowing more hot air.

What is Broadwind Energy Inc?

Small cap wind stock Broadwind Energy provides products and services in three segments: 1) Towers and Weldments, 2) Gearing and 3) Services. More specifically, the Towers and Weldments segment specializes in the production of wind turbine towers; the Gearing segment engineers, builds and remanufactures precision gears and gearing systems for wind, oil and gas, mining and other industrial applications; and the Services segment offers a range of services primarily to wind farm developers and operators.

As for wind stock or investment peers, the First Trust Global Wind Energy ETF tracks the ISE Global Wind Energy Index through 49 holdings; Vestas Wind Systems is a Denmark-based company that is the largest wind turbine maker in the world; and China Ming Yang Wind Power Group Ltd is a China based designer, manufacturer, seller and servicer of megawatt-class wind turbines and integrated solutions of clean energy. 

What You Need to Know About or Be Warned About Broadwind Energy Inc

Broadwind Energy appears to have started moving higher this year thanks to a steady stream of announcements about new orders. In fact and since the start of 2013, the company has recorded $306 million in new tower orders with the latest being $106 million in tower orders from a US wind turbine manufacturer.

At the end of October, Broadwind Energy reported a 13% third quarter sales increase to $62.4 million thanks to continued strength in the Towers and Weldments segment (a 30% sales increase to $48.7 million) that was partly offset by weaker results in the Gearing and Services segments. The CEO noted:

"Internally, we are working to minimize the operational impact of the plant consolidation, which is on track. Gearing results were below expectations as we continue to grapple with productivity issues stemming from a mix of more complicated gearboxes versus loose gearing. Externally, Gearing revenues continue to be impacted by weak demand from customers in the mining sector."

And:

"In our Services segment, we saw some recovery from a weak first half. However, sales and earnings continue to lag behind the prior year due mainly to low turbine construction activity and lower gearbox repair activity."

In response, Broadwind Energy has been making process and management changes in the Gearing segment and the CEO predicts improvement in the fourth quarter plus the company is focused on better leveraging precision gearing expertise and service experience to meet emerging customer preferences for uptower gearbox repair services. Net loss from continuing operations came in at $2.6 million or $.18 per share verses a loss of $3.9 million or $.28 per share plus cash and equivalents rose to $24.0 million as of September 30 – meaning the company is not endangered from running out of money.

Finally, it should be noted that Broadwind Energy has reported positively trending revenues of $210.71M (2012), $185.85M (2011), $136.90M (2010) and $184.80M (2009) for the past four years along with increasingly smaller net losses of $17.91M (2012), $21.95M (2011), $85.17M (2010) and $110.12M (2009).

Share Performance: Broadwind Energy Inc vs. FAN, VWDRY & MY

On Monday, small cap Broadwind Energy rose 4.96% to $6.56 (BWEN has a 52 week trading range of $2.00 to $10.43 a share) for a market cap of $95.53 million plus the stock is up 203.7% since the start of the year and down 92.1% over the past five years. Here is a look at the one year and long term performance of Broadwind Energy along with the First Trust Global Wind Energy ETF and wind stock peers Vestas Wind Systems and China Ming Yang Wind Power Group Ltd:

As you can see from the above chart, wind stocks have been ugly investments for investors over the long haul.

Nevertheless, the technical charts are looking better:

The Bottom Line. Certainly, small cap wind stock Broadwind Energy is on more stable ground now than in the past and might just be worth a closer look, but it remains to be seen whether long term investors have any hopes of recouping their losses in the near future.