Vestas Earnings: Operating Losses Persist, but Trending in the Right Direction

No-moat Vestas delivered solid second-quarter results, reiterating our view that operational issues at Siemens Energy are idiosyncratic and will unlikely detract from Vestas’ financial performance. Its second-quarter operating loss of EUR 70 million was broadly in line with the company-compiled consensus for a loss of EUR 62 million, which is trending in the right direction (if we exclude nonrecurring income) as lower-margin orders from the backlog are executed. The average price of second-quarter orders increased sequentially to EUR 1.04 million per megawatt from EUR 890,000 per megawatt, and thus we wouldn’t be surprised if Vestas is able to report a quarterly profit by the end of the year, provided commodity prices remain stable. Management confirmed its full-year EBIT margin guidance of between negative 2% and 3%. Shares are marginally undervalued from our DKK 197 fair value estimate, which we maintain.