Never profitable, fuel cell pioneer Plug Power (Nasdaq: PLUG) has added injury to insult in each of its last five quarters by reporting numbers showing it to be even less profitable than Wall Street had expected. Will its Q4 and full-year 2006 report, due out Thursday morning, finally break the chain of bad news?
What analysts say:
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Buy, sell, or waffle? Only four analysts still reach for the Plug (down three from last quarter). Each rates the stock a hold.
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Revenues. On average, the analysts are looking for quarterly sales to rise a mere 4% to $2.8 million.
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Earnings. Losses are predicted to contract to $0.14 per share.
What management says:
The big news at Plug this quarter came as recently as last week, when two executive departures came on a single day. First, company president Gregory Silvestri resigned in favor of Chief Executive Officer, now CEO and President, Dr. Roger Saillant. Simultaneously, new Chief Financial Officer Jean Nelson also jumped ship, leaving the company temporarily CFO-less.
Although the company informed investors of the resignations in separate press releases, Silvestri was sent off with several kind words, and Nelson's departure was characterized as motivated by "personal reasons." These two high-level exits, neither one coming with any real explanation, seem strange. Most curious of all: Nelson had been with the company less than three months before turning around and walking back out the door. One can't help but wonder if Nelson's "personal reasons" involved not wanting to be part of a sinking ship.
What management does:
Actually, you don't even need access to the corporate books to find reasons to walk away from this one. Public filings alone show that gross margins have continued to deteriorate all year long. As for operating and net margins, they remain so negative as to not be worth calculating.
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Margins
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6/05
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9/05
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12/05
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3/06
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6/06
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9/06
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Gross
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(14.6%)
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(11.5%)
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(19.9%)
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(30.0%)
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(35.3%)
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(43.9%)
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All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
This column is taking on all-too-pessimistic a tone, and I'm struggling to find something good to say about Plug -- some reason that the company might be worth the $325 million market capitalization that investors are ascribing to it.
All I can come up with, though, is that thanks to its ruble infusion last year, Plug now appears to have sufficient funds on hand to continue burning cash for several more years before it runs out. Parsing the language of last quarter's conference call, it appears the firm plans to burn no more than $50 million per year going forward, and at that rate, its $278 million in cash and equivalents should keep the business solvent for at least five years. With Saillant promising to be "pretty penurious" with those funds, as opposed to "profligate" (I'll say one thing for the CEO: His firm may not be able to turn a profit, but the boss has got a billion-dollar vocabulary), at least investors don't have to worry about significant financing-related dilution in the near future.
I guess that's something.
What did we expect out of Plug last quarter, and what did we get? Find out in:
Fool contributor Rich Smith does not own shares of any company named above.
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