FuelCell May Be Turning the Corner

What happens to a company that gets a single order worth more than 1.5 times last year's sales? For FuelCell Energy (Nasdaq: FCEL  ) your stock shoots through the roof, reversing a downtrend for the stock for nearly two months.

On Tuesday, FuelCell announced a 70 MW order from POSCO Power, a subsidiary of POSCO (NYSE: PKX  ) , that will keep the company busy for the next two years. The order is for at least $129 million, or more than five times the company's last quarter revenue. At the end of last quarter, the company was running at just 35 MW of capacity annually, so production will be full with just this one order.

Fuel cells are a promising technology that has given FuelCell and Ballard Power Systems (Nasdaq: BLDP  ) growing revenue, but profits have been elusive so far. The hope is that growing economies of scale will help the companies push into profitability, and orders like this are a step in that direction.

Recently, gross margins have improved from -23.2% a year ago to -6% in the fourth quarter and flat in the first quarter of this year. With sales likely to keep rising from $25.8 million last quarter FuelCell is getting close to busting into profitability.

Sales pace picking up
An improving contract backlog is a sign of future growth. FuelCell received an $11.7 million contract to develop a clean-coal fuel cell power plant, a research contract for biogas and carbon capture, and fuel cell sales in London and California. As research deals lead to more capabilities for the company, it will help expand offerings to stay ahead of competitors.

Big power players General Electric (NYSE: GE  ) and United Technologies (NYSE: UTX  ) are also getting into the fuel cell business, but right now FuelCell Energy looks to have some momentum.

Interested in reading more about FuelCell Energy? Click here to add it to My Watchlist to find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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