The Danish wind turbine maker surprised the market in November by reporting higher-than-expected revenue and turning from loss to profit in the third quarter, sending the shares 8% higher on the day. After also announcing several large orders in the fourth quarter the expectations are high for the full year earnings report this week.
“I’m expecting .. a blockbuster quarter for Vestas,” Morningstar’s equity analyst Matthew Donan states, referring to the announcement of several large orders during the fourth quarter. This included a 1.1 GW order, its largest order ever received in the United States.
“Consensus is guiding for 7.6GW of orders during the quarter compared with 4.5 GW during the previous quarter”, Donen adds.
While offshore wind developers have struggled with rising interest costs and supply chain disruption, Vestas has benefited from the delivery of higher-priced turbines. This is expected to continue in the fourth quarter.
“Importantly, profitability is likely to trend higher and remain in positive territory due to higher turbine selling prices”, Donan says.
Are Vestas Shares Fairly Valued?
Morningstar’s analyst maintained Vestas’ fair value estimate of 197 Danish kroner following the group’s strong third-quarter results.
The analyst forecasts a revenue growth of 6% in 2023 to €15.4 billion (£13.16 billion), driven by double-digit pricing growth for onshore turbines and a 10% increase in service revenue. However, Donen anticipates that profitability will remain under pressure because of growing competition, despite higher selling prices and easing commodity price inflation.
With Vestas shares trading around 192 Danish kroner Matthew Donen believes the shares are fairly valued, in comparison to the fair value estimate of 197 Danish kroner.
Key Morningstar Metrics for Vestas Stock
• Fair Value Estimate: 197 DKK;
• Current Price: 191.84 DKK;
• Morningstar Rating: ★★★;
• Morningstar Economic Moat Rating: None;
• Morningstar Uncertainty Rating: High.