FuelCell Energy Inc Earnings: What to Expect Monday

Fuel-cell related companies are soaring throughout the market, as high-profile deals raise awareness of the alternative-energy niche. Will FuelCell keep the enthusiasm alive?

Mar 6, 2014 at 10:55PM

FuelCell Energy (NASDAQ:FCEL) will release its quarterly report on Monday, and bullish investors have sent shares of this fuel-cell power-plant developer soaring in recent days as the space has drawn a lot of attention lately. With industry peer Plug Power (NASDAQ:PLUG) having made a deal with Wal-Mart to supply the retailer with fuel-cell power, Plug, Ballard Power Systems (NASDAQ:BLDP), and FuelCell have all inspired dreams of huge growth in the near future.

FuelCell's area of expertise is designing, manufacturing, installing, and maintaining stationary fuel-cell power plants. By taking advantage of a wide variety of different fuels, FuelCell plants have generated more than 1,500 gigawatt-hours of electricity. Yet, while many believe that all fuel-cell-related stocks are the same, Plug and Ballard use proton-exchange membrane technology that's different from the molton carbonate fuel-cell technology that FuelCell specializes in. By using that technology, FuelCell can produce larger systems designed for higher-energy applications. Let's take an early look at what's been happening with FuelCell Energy during the past quarter, and what we're likely to see in its report.

Fcel
Dominion Resources plant in Bridgeport, Conn., using FuelCell technology. Source: Dominion Resources.

Stats on FuelCell Energy

Analyst EPS Estimate

($0.04)

Year-Ago EPS

($0.07)

Revenue Estimate

$43.44 million

Change From Year-Ago Revenue

19.5%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

When will FuelCell earnings get into the green?
Analysts have become less optimistic about FuelCell earnings in recent months, keeping their January-quarter estimates unchanged, but widening their loss projections for this fiscal year and next by 33% to 50%. The stock, though, has soared, jumping 118% since late November.

FuelCell's October-quarter results were extremely disappointing, chopping off a quarter of the stock's value in a single day. Sales jumped 56% from the year-ago quarter, and FuelCell's annual manufacturing run rate climbed 25%, to 70 megawatts. But investors were disturbed by the abrupt slowdown in sequential growth between the company's fiscal third and fourth quarters, with gross profits actually falling by more than 40%, as revenue only posted a 2% gain. Unfortunately for investors, abrupt start-and-stop movements are nothing new in the fuel-cell industry, with Plug Power and Ballard also having been prone to big swings in both directions in the past.

But FuelCell has taken big steps forward to try to demonstrate its commercial viability. In late December, the company said it had completed a project for Dominion Resources, with a fuel-cell system producing 14.9 megawatts of power accompanied by a 15-year contract for Dominion to buy the energy produced by the system.

Unfortunately, FuelCell also suffered from bad timing during the quarter. The company priced a stock offering at $1.25 per share in mid-January, which was nearly 25% below the prevailing price of the shares right before the offering. By not waiting until the stock hit its current level of $3, FuelCell gave up what could have been an extra $40 million from the offering, and also diluted the gains that shareholders could have enjoyed if the offering hadn't taken place. By contrast, Plug Power waited for its shares to soar before pricing a secondary offering of its own just earlier today.

One key question facing FuelCell in its battle against Plug Power and Ballard is whether FuelCell's larger-scale plants will emerge as superior technology to Plug and Ballard's smaller systems. The advantage of FuelCell's technology is that it is more electrically efficient and runs on a wider variety of fuels than smaller PEM technology. But the mobile systems that FuelCell's competitors offer can serve a wider range of applications, such as oilfield power generation, where producers will want to move units to different drilling sites. In addition, the big order that Plug Power got from Wal-Mart for 1,500 of its GenDrive power units in six of its distribution centers -- units for which Ballard is the exclusive supplier of fuel-cell stocks -- suggests that buyers might be more comfortable with the flexibility of PEM-based fuel cells.

In the FuelCell earnings report, watch to see how the company responds to the huge rise in its share price. Without finding ways to match the growth of its industry peers, and demonstrate the superiority of its technology, FuelCell will have a hard time sustaining the gains it has enjoyed lately.

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