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Consolidated Water (CWCO) Down 11.9% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Consolidated Water (CWCO - Free Report) . Shares have lost about 11.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Consolidated Water due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Consolidated Water Q2 Earnings Surpass Estimates

Consolidated Water Co. Ltd. reported second-quarter 2020 earnings of 13 cents per share, which beat the Zacks Consensus Estimate of 12 cents by 8.3%.

Total Revenues

The company’s total second-quarter revenues came in at $19.1 million, up 4.4% from the year-ago figure of $18.3 million. The reported revenues also surpassed the Zacks Consensus Estimate of $18 million by 6.3%.

The year-over-year improvement can be attributed to strong contribution from its Services segment.

Segment Details

Retail revenues for the second quarter decreased 14.5% year over year to $6 million. This was due to a 16% decrease in the volume of water sold as a result of the temporary cessation of tourism on Grand Cayman in response to the COVID-19 pandemic.

Bulk revenues came in at $5.9 million, down 14.5% from the prior-year figure. The decrease in revenues was due lower energy costs in the Bahamas.

Manufacturing revenues amounted to $3.77 million, down 12.1% year over year. The year-over-year decline was due to a decrease in the number of active projects.

Services revenues were $3.47 million for the quarter, up 285.5% from $0.9 million in the year-ago period. The increase was due to the addition of $3.4 million revenues from PERC Water as a result of Consolidated Water’s acquisition of a 51% stake in the former in late October 2019.

Highlights of the Release

Gross profit for the second quarter was $7.3 million or 38.3% of total revenues, down 3% from $7.6 million or 41.3% in the year-ago period.

For the second quarter, total cost of revenues increased 9.3% year over year to $12.3 million.

General and administrative expenses increased 15.9% from the year-ago level to $11.8 million.

In the second quarter, all business segments of the company were adversely impacted by the COVID-19 pandemic. However, Consolidated Water is well positioned to successfully navigate this uncertain and turbulent time.

Financial Highlights

Cash and cash equivalents as of Jun 30, 2020 were $34.9 million, down from $42.9 million on Dec 31, 2019.

Long-term debt as of Jun 30, 2020 was $0.15 million compared with $0.06 million on Dec 31, 2019.

Cash used in operating activities in first-half 2020 was $9.2 million versus cash provided from operating activities of $6.1 million in the comparable year-ago period.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 25% due to these changes.

VGM Scores

Currently, Consolidated Water has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Consolidated Water has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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