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Energy and renewable energy projects company Ameresco (NYSE:AMRC) beat analysts' expectations in Q2 CY2024, with revenue up 33.9% year on year to $438 million. The company's full-year revenue guidance of $1.75 billion at the midpoint also came in 6% above analysts' estimates. It made a non-GAAP profit of $0.10 per share, down from its profit of $0.12 per share in the same quarter last year.
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Ameresco (AMRC) Q2 CY2024 Highlights:
- Revenue: $438 million vs analyst estimates of $376.1 million (16.4% beat)
- EPS (non-GAAP): $0.10 vs analyst estimates of $0.26 (-$0.16 miss)
- The company lifted its revenue guidance for the full year from $1.65 billion to $1.75 billion at the midpoint, a 6.1% increase
- EPS (non-GAAP) guidance for the full year is $1.25 at the midpoint, missing analysts' estimates by 8.7%
- EBITDA guidance for the full year is $220 million at the midpoint, below analyst estimates of $223.7 million
- Gross Margin (GAAP): 14.9%, down from 17.9% in the same quarter last year
- Adjusted EBITDA Margin: 10.3%, down from 11.4% in the same quarter last year
- Free Cash Flow of $157.8 million is up from -$85.78 million in the previous quarter
- Market Capitalization: $1.43 billion
Having played a role in upgrading the energy solutions of Alcatraz Island, Ameresco (NYSE:AMRC) provides energy and renewable energy solutions for various sectors.
Energy Products and ServicesAreas like the energy transition and emission reduction are thematic and front of mind today. This can be a double-edged sword for the energy products and services industry. Those who innovate and build new expertise can jolt demand while those who cling to legacy technologies or fall behind in the trending areas could see their market shares diminish. Bigger picture, energy products and services companies are still at the whim of construction and infrastructure project volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Thankfully, Ameresco's 14.4% annualized revenue growth over the last five years was exceptional. This shows it expanded quickly, a useful starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Ameresco's recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 6.8% over the last two years.
This quarter, Ameresco reported wonderful year-on-year revenue growth of 33.9%, and its $438 million of revenue exceeded Wall Street's estimates by 16.4%. Looking ahead, Wall Street expects sales to grow 17.8% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Ameresco was profitable over the last five years but held back by its large expense base. It demonstrated mediocre profitability for an industrials business, producing an average operating margin of 6.6%. This result isn't too surprising given its low gross margin as a starting point.
Analyzing the trend in its profitability, Ameresco's annual operating margin might have seen some fluctuations but has generally stayed the same over the last five years, which doesn't help its cause.
This quarter, Ameresco generated an operating profit margin of 4.8%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Ameresco's EPS grew at an unimpressive 7.4% compounded annual growth rate over the last five years, lower than its 14.4% annualized revenue growth. However, its operating margin didn't change during this timeframe, telling us non-fundamental factors affected its ultimate earnings.
We can take a deeper look into Ameresco's earnings to better understand the drivers of its performance. A five-year view shows Ameresco has diluted its shareholders, growing its share count by 11.4%. This has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Ameresco, its two-year annual EPS declines of 22.4% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Ameresco reported EPS at $0.10, down from $0.12 in the same quarter last year. This print missed analysts' estimates. Over the next 12 months, Wall Street expects Ameresco to grow its earnings. Analysts are projecting its EPS of $1.08 in the last year to climb by 71.6% to $1.85.
Key Takeaways from Ameresco's Q2 Results We were impressed by how significantly Ameresco blew past analysts' revenue expectations this quarter. We were also glad its full-year revenue guidance came in higher than Wall Street's estimates. On the other hand, its EPS missed, and its full-year EPS and EBITDA guidance fell short of Wall Street's estimates. Overall, this quarter seemed decent with stronger demand at the expense of profitability. The stock remained flat at $26.85 immediately following the results.
