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On Tuesday, Baird analysts revised their outlook on Ameresco stock (NYSE:AMRC), downgrading it from Outperform to Neutral and significantly reducing the price target to $13 from the previous $25. The stock, currently trading at $10.09, has seen a dramatic 70% decline over the past six months. This adjustment follows Ameresco’s recent quarterly financial report, which, despite outperforming expectations in key metrics, presented guidance for earnings per share (EPS) that fell short of consensus forecasts.
The report highlighted that Ameresco’s fourth-quarter results surpassed both Baird’s and Wall Street’s projections across all primary indicators. However, the company’s forward-looking statements indicated EPS figures well below the consensus, which Baird believes will likely pressure the stock value in the short term.
A contributing factor to the lowered expectations is a series of cost overruns that negatively impacted Ameresco’s gross margins, which stand at just 14.5%. The company also operates with a significant debt burden, with a debt-to-equity ratio of 2.24x. Furthermore, management at Ameresco has indicated that certain projects have been put on hold due to uncertainties within the federal government, a significant client that accounted for 20% of the company’s revenue in 2024. InvestingPro analysis reveals 15+ additional key insights about Ameresco’s financial health and future prospects.
Despite Ameresco’s efforts to diversify its business, expanding its backlog and operating Energy Assets, the persistent uncertainty is expected to cast a shadow over the stock, as per Baird’s analysis. The firm’s decision to downgrade the stock to Neutral reflects concerns that these issues may continue to influence Ameresco’s financial performance and stock price. Trading at just 0.52x book value, InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, though investors should carefully weigh the company’s challenges against its potential recovery.
In other recent news, Ameresco reported its fourth-quarter 2024 earnings, exceeding expectations with an EPS of $0.88 against the forecasted $0.78, and a revenue of $533 million, slightly above the anticipated $523.61 million. Despite this performance, the company faced a significant stock drop of nearly 12% in aftermarket trading. Analysts from Stifel reduced their price target for Ameresco to $18 from $34, maintaining a Buy rating, citing lower-than-expected adjusted EBITDA and concerns over federal project funding under the new administration. UBS took a more conservative stance, downgrading Ameresco from Buy to Sell and slashing the price target to $8, due to potential risks in adjusted EBITDA guidance for 2025 and beyond.
Craig-Hallum also adjusted its price target to $34 from $40, keeping a Buy rating, while noting Ameresco’s impressive backlog growth and revenue visibility. The company converted over $1 billion of awards into its backlog, with a total project backlog reaching $2.5 billion. Ameresco’s guidance for 2025 includes a revenue target of $1.9 billion and an adjusted EBITDA of $235 million, with plans to deploy 100-120 megawatts of energy assets.
The company acknowledged potential challenges due to policy changes affecting federal contracts, which constitute a significant portion of its revenue. Despite these hurdles, Ameresco remains focused on long-term growth prospects, leveraging its substantial project backlog and expanding energy asset operations.
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