Roth Cuts PT on RGS Energy (RGSE) to 80c Following Q3 Miss, Lack of Guidance

Roth Capital trims its price target on RGS Energy (Nasdaq: RGSE) from $1.85 down to 80 cents, but maintains an Neutral rating following Q3 results issued Wednesday night.

Analyst Philip Shen offered the following thoughts on RGSE: RGSE posted a miss on its residential metrics vs. our estimates and did not issue guidance. Despite the miss, positives in the quarter include (1) ASPs being up 6.5% YoY and (2) Backlog increased 137% YoY to $58mn. Management has an aggressive plan to grow its operations, while focusing on the higher-margin residential and small commercial segments, which may require additional investments in sales and in-house construction staff. The liquidity situation, however, remains tight, in our view, with just $1.8mn of cash as of September. Additionally, the company is in the midst of negotiating a new loan agreement with Silicon Valley Bank that would potentially reset its covenants. As a result, we remain Neutral and lower our price target to 80c.

• Q3 results are not comparable with estimates due to discontinued large commercial operations. Despite this, RGSE posted residential results that missed our expectations. The company generated $14mn of residential revenue vs. ROTHe of $20mn and $3.8mn of Sunetric (residential HI) revenues vs. ROTHe of $4.5mn. Residential GMs were in-line at 19.7% vs. ROTHe of 20.0% but Sunetric margins missed at 4.0% vs. ROTHe of 20.0%.
• No guidance or outlook. The company remains in turnaround mode and did not issue guidance or provide a detailed outlook. RGSE, however, published its backlog of $58mn, which is up 137% YoY.
• Lowering estimates. We reduce our 2015 revenue forecast to $105mn vs. prior consensus of $165mn and prior ROTHe of $145mn. As a result, we reduce our 2015 EPS forecast to -65c vs. prior consensus of -30c and prior ROTHe of -46c.

For an analyst ratings summary and ratings history on RGS Energy click here. For more ratings news on RGS Energy click here.

RGS Energy closed at $0.82 yesterday.

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