Plug Power (NASDAQ:PLUG), a leader in fuel-cell solutions, plans on releasing its fourth-quarter earnings in the next few weeks. Although there will probably be much attention paid to the company's efforts to bring fuel-cell solutions to the electric-vehicle market in China -- something the company sees as a massive market opportunity -- investors must remain focused on the company's performance in the absence of the all-important investment tax credit.

The stock has been on a wild ride so far this year, climbing as much as 8% and dropping as low as 28%. Will the earnings release be enough to charge up investors? Let's look at some things management is telling us to expect.

Several batteries on a table next to the symbol for hydrogen formed by green plants.

Image source: Getty Images.

Hitting the books

While the market has proved that solar and wind power are viable energy options, the increasing acceptance of hydrogen fuel cells remains dubious. And with the renewal of the investment tax credit for fuel cells unlikely, even more skepticism surrounds the industry's success.

Plug Power, however, is showing signs that industry acceptance may not be that unimaginable. Reporting 4,010 GenDrive deployments in 2016, management exceeded its guidance of deployments between 3,800 units to 4,000 units. In addition to longtime customers such as Wal-MartBMW, and Home Depot, the company also provided its GenDrive units to new customers, such as FM Logistics and Carrefour, a leading European retailer. 

According to preliminary results, the company secured $280 million in contract bookings for fiscal 2016, exceeding guidance that it provided in January 2016. Should the company proceed to report $280 million in bookings, it would represent growth of approximately 40% over the $200 million it secured in the previous year.

Sparing no expense

Although Plug Power exceeded guidance in both GenDrive deployments and contract bookings, the earnings report will have surely have some misses. In the preliminary earnings release, management reported that it achieved breakeven status on an operational cash flow basis for the quarter. If correct, that means the company failed to achieve its annual guidance -- negative-$20 million or less -- regarding operational cash flow. Instead, the preliminary results indicate that the company will report negative-$29.6 million in operational cash flow.

Over the past five years, the company has achieved success in growing revenue; however, it has been unable to find a way to convert this revenue to positive operational cash flow. 

PLUG Revenue (Annual) Chart

PLUG Revenue (Annual) data by YCharts

On the bright side, though, the apparent $29.6 million in negative operational cash flow does represent an improvement, stemming the downward trend it had been on.

Marginally good news

Lastly, investors will surely see management celebrate its presumed success in expanding the company's gross margin, which according to preliminary results will total 9.2%. If accurate, this would further mean the company achieved an annual gross margin of 4.5%, coming up short of management's guidance for a fiscal 2016 gross margin in excess of 10%. Though not meeting expectations, it still represents an improvement over the gross margin of negative-9.6% it reported in fiscal 2015.

Presumably, the main driver of the company's gross-margin improvement is simple: success in controlling expenses related to its services performed on fuel-cell systems and related infrastructure.

Two household-looking batteries have "hydrogen fuel cell" written on them.

Image source: Getty Images.

In the third quarter, the company -- for the first time -- reported a positive gross margin, of 5.9%, on its services business. In terms of the first nine months of fiscal 2016, the company still reported a negative services margin; however, a year-over-year comparison elucidates the improvement. Whereas the company reported a negative-72.3% gross margin on its services business through the first nine months of fiscal 2015, the company reported a gross margin on its services business through the first nine months of fiscal 2016 of only negative-5.2%.

Investor takeaway

Plug Power's growth in contract bookings is commendable, and even though it exceeds management's guidance, investors must temper any excitement with the reminder that the company probably missed on operational cash flow and gross-margin guidance. Failing to achieve its guidance is nothing new for the company -- something that's imperative for investors to remember if management provides guidance for the year ahead. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.