The Driving Force Behind Capstone Turbine

Shares of Capstone Turbine Corp. (NASDAQ: CPST) jumped on big volume Tuesday. There was no specific reason for the gains, but it is likely chasing fuel cell players and other alternative energy stocks. The maker of microturbines has also been moving slowly toward profitability as markets for its microturbines grow.

The microturbines are used for electrical power generation, cogeneration, biogas-fueled renewable energy and hybrid vehicle power. What helps is that these microturbines need no lubricants or coolants, and they have very few maintenance intervals, which provide a hospital, for example, with much lower operating costs.

Turbines have attracted interest as a range extender for hybrid vehicles and other uses. The smallest of its models can provide instant-on backup power to charge the main batteries. The company also has been a supplier of microturbines to fuel-cell maker UTC Power’s PureComfort System product. UTC Power was sold in 2013 to ClearEdge Power.

Last week, the company announced the sale of turbines to two hospitals in the Los Angeles area. The sales were made through Regatta Solutions, which distributes Capstone’s products on the West Coast. The turbines, powered by natural gas, will be used to offset the hospitals’ demand for traditional power and provide backup power.

Capstone’s shares were up 18.37% to $2.32 in the early afternoon Tuesday, after earlier setting a new 52-week high of $2.42. Make that a multiyear high. The shares have risen 85% since December 31 and have soared 166.3% since the end of 2012.

The company reported a loss of $0.01 a share in its fiscal third quarter, which ended on Dec. 31. That was an improvement over a loss of $0.04 a share a year earlier. Revenue was up 11.3% to $37 million. An improvement was evident in results for the first three quarters. The per-share loss was $0.04 for the nine months, up from a loss of $0.06 a year earlier. Revenue of $96.67 million was up 4.9%.

Capstone’s goal for the 2014 fiscal year is to grow revenue, which it is doing, and end the year with positive earnings before interest, taxes and depreciation. It believes the latter goal is achievable.

The stock is rated a modest Buy from analysts. The target price before Tuesday was $2.06. It was upgraded to Outperform from Market Perform in February by FBR Capital.