Apr Energy PLC Sinks On Profit Warning: Could Aggreko plc Be Next?

Apr Energy PLC (LON:APR) is firmly out of favour with markets, but is Aggreko plc (LON:AGK) really that much better?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shares in APR Energy (LSE: APR) fell by more than 10% to a record low this morning, after the generator hire firm issued a profit warning. APR’s shares have now lost 70% of their value over the last 12 months.

APR’s management said today that 2014 profits would be “at the low end” of expectations and that “hesitancy among our prospective customers to make decisions” meant that 2015 growth would be limited.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

What’s gone wrong?

APR flagged up a 45% increase in revenue this morning, and at first glance, it’s hard to understand why APR has fared so badly this year, given that full-year profits are expected to rise significantly.

However, a closer look reveals that APR is heavily dependent on its 450MW contract in Libya. This provides around 50% of the firm’s operating earnings, according to estimates by broker Morgan Stanley.

Libyan woes

APR agreed an extension for its 450MW Libyan contract in July, but said today it is still in the “final stages” of signing the associated contract addendum, even though the contract only runs until the first quarter of next year.

The firm also revealed that 100MW of the 450MW it supplies in Libya will now be offline until Q1 2015, due to the relocation of a generator. This means that the revenue associated with this generator will be deferred until next year, cutting 2014 earnings.

I believe that APR’s dependence on Libya is one reason why its share price has fallen so far this year: APR shares now trade on an unusually low 2014 forecast P/E of 6, whereas APR’s larger peer, Aggreko (LSE: AGK), trades on a forecast P/E of 18,

APR vs Aggreko

Aggreko’s share price has fallen by around 40% from its 2012 peak, which might suggest that Aggreko faces similar problems to APR. However, the larger firm’s income is far more diverse and I believe its outlook is more stable.

Despite this, I think Aggreko’s P/E of 18 is too high: the firm’s forecast earnings in 2014 and 2015 are expected to be lower than those reported each year since 2011.

Unless Aggreko surprises the market, I believe further falls are possible: frankly, I’d rather take a punt on low-rated APR than invest in Aggreko at today’s prices, although I believe there are far better buys than either company in today’s market.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Roland Head has no position in any shares mentioned. The Motley Fool UK owns shares of Aggreko. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Senior woman wearing glasses using laptop at home
Investing Articles

SSE shares are up 15% since the market correction! Should I buy?

Jabran Khan looks at why SSE shares have been on an upward trajectory in recent weeks and decides if he…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

After crashing 29%, Spectris shares look cheap to me

After peaking at 4,167p last September, Spectris shares have slumped by over 29%. But I see deep value in the…

Read more »

British Pennies on a Pound Note
Investing Articles

Here is why I added this dirt-cheap FTSE 100 penny stock to my holdings!

Jabran Khan explains why he added this dirt-cheap FTSE 100 stock to his holdings and is excited by its recovery…

Read more »

Woman looking at a jar of pennies
Investing Articles

3 FTSE 100 penny stocks! Which is the cheapest buy?

Our writer examines three penny stocks that feature in the FTSE 100 index to ascertain whether they have a place…

Read more »

Arrowings ascending on a chalkboard
Investing Articles

Is the Vodafone share price an opportunity at current levels?

Jabran Khan looks at the current Vodafone share price and decides if he would add the shares to his holdings…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

4 gems I’d include in my Stocks & Shares ISA

Jon Smith explains some of the top stocks he's thinking about including in his Stocks and Shares ISA a we…

Read more »

Compass pointing towards 'best price'
Investing Articles

At 85p, are Rolls-Royce shares a no-brainer buy? 

The Rolls-Royce share price look very cheap right now. And I think this might be my last chance to buy…

Read more »

positive mental health woman
Investing Articles

My £3-a-day blue-chip passive income plan

Our writer sets out his passive income plan of investing a few pounds each day in top stocks.

Read more »