Vestas Wind Systems Q3 Results

Shares of Vestas Wind Systems A/S (CSE:VWS) slipped after the company reported underwhelming Q3 results that missed profit expectations across its Power Solutions and Service divisions.

At 6:21 AM (11:21 GMT), Vestas Wind Systems was trading 8.4% lower at DKK 124.6.

The company’s revenue and orders slightly surpassed forecasts, but profit margins fell significantly short, raising concerns about its ability to navigate ongoing challenges in the core wind turbine business.

Q3 Performance

For the third quarter, Vestas recorded €235 million in adjusted EBIT, with a margin of just 4.5%, considerably below the consensus of €352 million at a 7.1% margin.

While the company reported stronger-than-expected revenues and order intake—up 5% and 1% respectively versus consensus—the earnings miss came from weaker performance in both divisions.

Power Solutions Segment

The Power Solutions segment missed adjusted EBIT margins by 220 basis points due to higher-than-anticipated warranty provisions, now equivalent to 6% of group sales. Analysts at RBC Capital Markets remarked, “Disappointing set of results, with further Service set-backs somewhat surprising given the recent margin rebasing.”

Additionally, order volume for this division was below expectations, with onshore wind orders landing 8% short of consensus forecasts.

Service Division

The Service division also faced a 24% miss on adjusted EBIT due to higher costs and an unfavorable sales mix. Analysts linked the profit shortfall to a rise in transactional sales within the unit, which typically shows more stability but reported a “slightly slower-than-expected” recovery in profitability.

Revised Outlook

The weak Q3 results led Vestas to temper its fiscal year outlook, especially on margin expectations in the Service division. While overall revenue guidance remains between €16.5-17.5 billion, adjusted EBIT margins are now expected at the lower end of the previously stated 4-5% range, with Service EBIT projected at €450 million instead of the earlier €500 million estimate.

Analysts at J.P. Morgan noted, “We view the full-year updated guidance as ambitious and anticipate consensus to fall below the lower end of the 4% margin for the year.” Additionally, capital expenditures are now planned at €1 billion, down from €1.2 billion.

Future Expectations

Looking to the final quarter, Vestas anticipates stronger results, with Power Solutions margins projected at roughly 11-12%, above the consensus of 10.4%, and Service EBIT margins expected at 21%. However, RBC analysts cautioned that lingering issues could challenge the company in reaching its adjusted EBIT guidance.

The company’s lowered earnings outlook, combined with ongoing high costs, has dampened investor sentiment, leading to continued pressure on the stock after the missed quarterly targets and scaled-back expectations.