ACFN announces $12.3 million contract order - Analyst Blog

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ACFN announces $12.3 million contract order

Steven Ralston, CFA

Acorn Energy (ACFN) announced that its 84%-owned DSIT subsidiary received a very significant order from an undisclosed Asian customer. It is believed that the $12.3 million contract is the largest order for any underwater security system designed to protect energy infrastructure. It definitely is the largest order received by any of Acorn Energy's subsidiaries. Composed of a large number of AquaShield Diver Detection Sonar systems and PointShield Portable Diver Detection Sonar systems, deliveries are expected to begin in the fourth quarter of 2011 and span into 2012. With revenues at DSIT having been under pressure recently, primarily due to the delay of a follow-on order of a large expansion project, both the top and bottom lines of DSIT will benefit from this order, which potentially will enable DSIT's revenues to double in 2012.

Management continues to successfully execute on its strategy, with all three subsidiaries benefiting from important orders announced in the last few months. In the second half of 2011, Acorn announced that its fiber optic sensor seismic monitoring system subsidiary, US Seismic Systems (USSI), received five significant orders for pilot programs from oilfield service and equipment companies. Though the value of the proof-of concept contracts is approximately $1.6 million, the contracts could generate $36 million in annual revenues if they transition from development to production. To prepare for the expected growth, USSI leased a 21,000 square feet in an office-production-warehouse facility in the San Fernando Valley, which more than quadrupled USSI's workspace. At GridSense, revenue growth is currently being driven by a major TransformerIQ monitoring project by a leading southeastern electric utility. GridSense's gross margin is expanding, and the other utilities are expected to follow suit when positive results of the installations are announced.

Finally, Acorn Energy sold its majority-owned CoaLogix subsidiary for $101 million on August 31st. Acorn's after-tax proceeds are estimated to be approximately $57 million or $3.26 per share. Not only did the capital inflow provide the Board with the opportunity to initiate a regular and announce a special dividend, but also the added capital allows management to consider opportunistic acquisitions of other early-stage energy infrastructure operations, which could further enhance shareholder value. In the last four years, Acorn Energy has monetized two subsidiaries: Comverge in April 2007 and now CoaLogix in 2011.

We reiterate our Outperform rating on Acorn Energy, and our target of $6.10.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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