Stock Analysis: Broadwind Energy (BWEN)

Notes:
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash

Recap:
On Wednesday, Broadwind Energy reported their first quarter financial results.  Earnings were better than the company expected at a 7 cent loss on a slightly below guided $58.8 million revenues.  Gross profits rose 3.3% driving the increase earnings, showing that re-organizational efforts are working well.  Gross profit margins appear to continue to improve quarter over quarter as do revenues.  The company expects to post profits in what is typically a very strong second quarter in the yearly cycle.  The company's efforts to diversify their weldmelts teams should be a strong source of revenue for awhile.  It's known that oil and gas companies as well as a number of other industrial companies are having issues finding welders.  Broadwind has people and abilities such they their contracting out the work could become a lucrative option for them to help diversify the reliance on wind towers.  Wind towers have been accelerating, however, this could be due to risk of PTC legislation expiring by the end of the year.  Risks I saw in the quarter related mostly to the company's gearing business, which, despite efforts to improve both sales and efficiency, was worse sequentially quarter over quarter.  Management seemed to believe this wasn't an issue and things would be turned around, but labor contracts are going slower than expected and I sense other things (like blaming some of the bad quarter on weather - gearing development is done indoors usually) that have me concerned.  The PTC legislation is another area of concern.  Things are progressing on that front, but a decision isn't expected until after the November elections.  This will not affect 2014 and may affect 2015 orders slightly, since the legislation has a 2 year order clause to it, however, it significantly impacts the out years.  If PTC legislation fails, the company will have to rely on a growing economy with more energy consumption and higher prices for fossil fuels to keep themselves in line.  That's not a company in charge of its own destiny at this point.

My Stock Ownership Plans:
With accelerating revenues, growth, and profit margins, I currently seen a few quarters of growth for both the company and the stock at this point, making it worth to hold.  I still regard this to be a 2, though, as it popped pretty nicely after the quarter.  I believe it's possible to get this stock at $12.50 or less and that's my buy target.  My price target for the stock is $15.  The thing to watch out for will be any signs of deceleration in growth.  If you see anything that indicates that possibility, it'll be time to get out.