An embarrassment of riches
The fact that it’s able to run on a variety of fuels as the methane gas-powered one sold to CONSOL increases its value to end users, but it also drives change among its rivals. They’ve typically provided the industry with cheap reciprocating engines that are primarily relied upon as a backup source of power, but manufacturers such as Caterpillar Inc. (NYSE:CAT), Cummins Inc. (NYSE:CMI), and General Electric Company (NYSE:GE)‘s Dresser are finding they need to offer more if they want to compete with Capstone.
Because recip engines are noisy, generate higher amounts of emissions, and require more maintenance, Capstone has been able to show that its microturbines are really the economical choice when the total cost of ownership is considered. It just won an order from a Chinese customer for that reason.
That’s led its rivals to come up with some innovations, though they still lack Capstone’s technological advantages. Cummins, for example, recently introduced a dual-fuel engine for land-based drilling applications, as did Caterpillar, which is also offering retrofit kits for engines already on the market. But dual-fuel capabilities don’t offer nearly the same variability, since Capstone’s microturbines can run on natural gas, propane, sour gas, kerosene, diesel, and biodiesel.
It’s a gusher!
Shares of Capstone Turbine Corporation (NASDAQ:CPST) enjoyed a nice run up from their lows at the start of the year, jumping 35% even though they’re still down 7% from a year ago. The microturbine maker is seeing strong growth from most markets, though Europe, unsurprisingly, has been weak. Capstone figures that had European business simply been flat year over year, it would have enjoyed 35% revenue growth in the quarter. As it was, Europe’s revenues were down $15 million, so a rebound in the economy there will only serve to benefit Capstone’s future growth initiatives, however unlikely that seems at the moment.
The continent remains a dicey situation, as sovereign finances are a hodgepodge of rectitude. The EU authorized the taxation of bank accounts in Cyprus as a requirement of a bailout (before the nation’s parliament rejected the move), while Italy and Spain are still teetering on the brink and Greece and Portugal, of course, are always wildcards.
So Capstone may have a while for a recovery there, but so long as the rest of its business remains strong, I see it ultimately growing and winning more market share. Let me know in the comments section below if you agree that Capstone Turbine Corporation (NASDAQ:CPST) can continue to power higher.
The article Is Capstone Turbine Ready to Turbocharge Growth? originally appeared on Fool.com.
Fool contributor Rich Duprey owns shares of General Electric. The Motley Fool recommends Cummins and owns shares of Cummins and General Electric.
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