On Tuesday, Ballard Power Systems (NASDAQ:BLDP) will release its quarterly report, and after a long malaise, investors are finally getting encouraged about the potential for fuel-cell systems to become a profitable business. The success of Plug Power (NASDAQ:PLUG) has huge implications for Ballard, and Ballard's recent transaction with United Technologies (NYSE:UTX) shows how dedicated that the fuel-cell company is in exploring new technology and making in-roads with major players in the power industry.

Ballard Power Systems has been around for a long time, with its hydrogen fuel cells promising the ability to generate power on a more localized basis than grid-based power systems. Yet building up a customer base has been a challenge for Ballard, especially as rival forms of power generation have attracted as much or more attention from investors. But earlier this year, interest in fuel-cell companies like Ballard Power Systems and Plug Power ramped up sharply, and despite share-price volatility, investors are looking closely at whether Ballard can sustain its most recent upward momentum. Let's take an early look at what's been happening with Ballard Power Systems over the past quarter and what we're likely to see in its report.

Source: Ballard Power Systems.

Stats on Ballard Power Systems

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$15.35 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

When will Ballard Power Systems earnings get into the black?
In recent months, analysts have had mixed views on Ballard Power Systems earnings. They've widened their first-quarter loss estimates by a penny per share, but they've narrowed their loss projections for the full 2014 and 2015 years. The stock has taken off, doubling since late January.

Ballard Power Systems' fourth-quarter earnings explained the enthusiasm that investors have about the company's future prospects. Although the company is still losing money on a GAAP basis, Ballard swung to a gain in adjusted EBITDA for the quarter on a 5% jump in revenue. Gross margins soared six full percentage points as Ballard demonstrated the positive impact of cost-containment strategies.

Still, most of the gains in Ballard's share price likely came from the success that partner Plug Power has had lately. Plug Power recently announced a deal with Wal-Mart to sell 1,700 GenDrive fuel-cell system units to the retail giant, representing a much larger order than the small company had seen in the past. Because Plug Power uses Ballard Power Systems fuell-cell stacks in its equipment, Ballard also climbed on the news.

Yet Ballard Power Systems can't count on its partnership with Plug Power lasting forever. About a month ago, Plug Power decided to bring some of its fuel-cell stack manufacturing in-house, paying $4 million to buy rival manufacturer ReliOn. Although Ballard's exclusive supplier agreement will run through the end of 2014, the company should expect Plug Power to make a shift away from Ballard Power Systems after that point. Fortunately, Ballard has worked hard to diversify its exposure and has developed other uses for fuel cells in the telecom and automotive industries, and that should help cushion any blow from lost sales from Plug Power.

In addition, Ballard Power Systems is still trying to grow. Earlier this week, Ballard announced it would buy extensive intellectual-property assets from United Technologies related to its focus on proton-exchange membrane technology. Ballard gave United Technologies $2 million in cash, Ballard shares worth about $21 million at current prices, and the right for United Technologies to license back any technology that Ballard Power Systems develops from the patents and other intellectual property involved. Ballard CEO John Sheridan hopes that the deal will help the company boost licensing revenue as well as opening up new technology opportunities.

In the Ballard Power Systems earnings report, watch to see how Ballard sees its future beyond its Plug Power partnership. With investors having been disappointed in the past with promising events that flamed out, Ballard needs to demonstrate that this time, things are different for the fuel-cell industry.

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