Expected to report third-quarter earnings on Nov. 8, Plug Power (NASDAQ:PLUG), a leader in fuel cell solutions, believes it will be starting off the second half of the year with a bang. In a letter to shareholders that accompanied the second-quarter earnings report, management claimed that Q3 will be a "benchmark quarter" for the company. What's fueling the optimism? Let's take a closer look at several things we can expect management to address.

A big production

Arguably, Plug Power's greatest achievement in the first half of the year was the strategic agreement it inked with Amazon. After successfully deploying Plug Power's fuel-cell solution at one of its warehouses in Q4 2016, Amazon plans to transition the forklift fleets at several of its distribution centers this year. According to Plug Power's management, this agreement with Amazon will contribute $70 million to Plug Power's top line in fiscal 2017.

An illustration of a hydrogen atom next to the symbol from the periodic table.

Plug Power's hydrogen fuel cells will now be powering Amazon forklifts. Image source: Getty Images.

Characterizing the third quarter in its Q2 earnings report as "the largest quarter by far in the Company's history," management foresees deployment of 10 GenKey (its turnkey hydrogen solution) sites and nearly 3,000 GenDrive units. Prior to Q3, the company's biggest delivery in a quarter was 1,200 GenDrive units.

In addition to meeting the deployment forecast, it will be interesting to see if the company is on track to meet its fiscal 2017 revenue estimate: $130 million. Reporting sales of $36 million through the first half of the year, Plug Power will have to average $47 million on the top line for quarters three and four. If the company succeeds in meeting its guidance, that will be significant, considering that over the past 10 quarters, the company has averaged quarterly revenue of $22 million.

Hitting the road

Although Plug Power's prowess lies with material handling equipment, the company strives to pick up market share in electric vehicles. In the first half of the year, for example, the company made headway in this pursuit, shipping its first ProGen units to FedEx, which, in turn, tested the first prototype delivery truck in Los Angeles. In the third quarter, Plug Power aimed to begin on-road testing and trial of full-functioning ProGen-powered vehicles. 

Plug Power also recognizes China as an opportunity for its ProGen solution. In 2016, for example, the company signed memorandums of understanding with two Chinese companies to pursue the development of fuel-cell solutions for electric vehicles. Last quarter, management reported that it successfully shipped ProGen systems to China for use in five-ton and 7.5-ton delivery trucks, and, in Q3, the company aspired to continue on-road testing of the systems.

Besides confirming that Plug Power is continuing to report successes in ProGen's on-road testing in Los Angeles and China, investors can look to verify that the company is on track to achieve its fiscal 2017 guidance: shipment of 100 ProGen engines. 

Flowing in a new direction

In the company's Q2 letter to shareholders, management contended that in order to prepare for the high production goals in the second half of the year, the company had to "use a larger proportion of cash in the first half of the year." Looking ahead, however, management forecasts reporting positive cash flow in the second half of the year.

Two fuel cell batteries stand next to each other.

Fuel cell batteries. Image source: Getty Images.

And, in terms of fiscal 2017, management estimates free cash flow of negative $25 million to $35 million.

Although I won't be surprised if management achieves its revenue guidance, I'll be shocked if it achieves its cash flow guidance. It's nothing personal -- the company just hasn't regained my confidence in its ability to forecast earnings. In 2016, management had set a goal of using less than $20 million in cash from operations for the year. Missing the mark, Plug Power used $30 million in cash from operations, according to Morningstar.

Investor takeaway

Suggesting that the third quarter will be the company's biggest, Plug Power has set the bar high for its earnings report. The expectations may be lofty, but in terms of growing the top line, the company has a track record of success. Annual revenue has grown at an 18% compound annual growth rate over the past 10 years. I won't be surprised, therefore, if the company ends the third quarter poised to achieve its fiscal 2017 revenue forecast of $130 million. However, I'm considerably more skeptical about its ability to meet its cash flow guidance -- something that I'll be closely focusing on when the company reports. I may be doubtful, but perhaps this is the quarter when management starts to earn back investors' trust.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Scott Levine has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy.