On Friday, Oersted (CPH:ORSTED), a leading offshore wind energy company, is expected to unveil a comprehensive funding plan during its full-year 2023 results announcement on February 7, 2024. This announcement is highly anticipated as the company's capital expenditure plans suggest spending approximately 2.5 times its current market capitalization, while maintaining a funds from operations (FFO) to debt ratio near the S&P's minimum for its current BBB+ credit rating.
The market has been closely monitoring Oersted, especially after the company faced cost overruns and impairments in its US projects throughout 2023. These issues, combined with the large scale of proposed investments, have led to a lower stock price than what analysts consider fair value. Currently, the stock is trading at DKK 384.3, compared to Morgan Stanley (NYSE:MS)'s target of DKK 500.
Morgan Stanley remains optimistic about the offshore wind sector's outlook and anticipates a cyclical improvement in 2024. The firm expects upcoming offshore wind capacity auctions to serve as positive catalysts for the industry, with terms likely reinforcing the potential for value creation within the sector.
The funding strategy Oersted presents is seen as a pivotal factor that could either bridge the gap to Morgan Stanley's price target or, in a less favorable scenario, lead to a further decline in share price. The firm suggests that a clear and convincing funding plan could pave the way not only to the DKK 500 target but also to a potential bull case scenario of DKK 1,000 per share. Conversely, should the funding plan fail to alleviate market concerns, a negative reaction in Oersted's share price is expected.
InvestingPro Insights
Oersted's upcoming full-year 2023 results announcement is set to provide critical insights into the company's financial health and strategic direction. Ahead of this pivotal event, InvestingPro data and tips offer a deeper look into Oersted's market performance and analyst expectations.
InvestingPro data indicates a current market capitalization of 23,448.59 million USD, suggesting a sizeable presence in the energy sector. Despite this, Oersted's P/E ratio stands at a negative 7.78, reflecting investor concerns over profitability. This is further emphasized by the adjusted P/E ratio for the last twelve months as of Q3 2023, which is at a high 203.4, indicating that earnings may not be keeping pace with the company's valuation.
Moreover, the company's revenue has seen a notable decline, with a 20.99% decrease over the last twelve months leading up to Q3 2023. This is in line with one of the InvestingPro Tips, which suggests that analysts anticipate a sales decline in the current year. However, it's worth noting that Oersted has managed to maintain a gross profit margin of 31.63% during the same period, reflecting a degree of resilience in its operations.
On the upside, Oersted has shown a strong return over the last three months, with a 39.75% price total return, which could signal a recovery trend. Additionally, the company has raised its dividend for 7 consecutive years, with a dividend yield of 3.51%, which may appeal to income-focused investors.
For those looking to delve deeper into Oersted's financials and market performance, InvestingPro offers additional insights. Subscribers can access more InvestingPro Tips, including the company's debt levels and profitability forecasts. With a special New Year sale, subscribers can now enjoy up to a 50% discount on an InvestingPro subscription. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription, and unlock the full spectrum of 10 additional InvestingPro Tips for Oersted.
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