What happened

Easy come, easy go.

Fuel cell stocks had a banner day yesterday as news of President Biden's $1 trillion infrastructure bill passing the House sent investors flocking to renewable energy names in hopes of benefiting from government largesse next year. But reality set in this morning when one of yesterday's strongest performers -- Ballard Power Systems (NASDAQ:BLDP), which specializes in fuel cells for buses -- reminded investors that, so far at least, fuel cell stocks remain incapable of earning a profit, by delivering an even-uglier-than-expected third-quarter earnings report.

Ballard stock is crashing in consequence -- down 10.5%. And now fellow fuel cell stocks Bloom Energy (NYSE:BE) and Nikola (NASDAQ:NKLA) are following Ballard down, falling 3% and 2.2%, respectively. (On the plus side, Plug Power (NASDAQ:PLUG) is hanging on by its fingernails with a 0.9% gain as of 11:10 a.m. EST.)

Three arrows trending down over a background of a map and dollar signs.

Image source: Getty Images.

So what

When I say "earnings," of course, I mean losses. Heading into Q3, analysts had forecast that Ballard would lose $0.06 per share on sales of $26.5 million. So the news already wasn't expected to be great -- but then Ballard dropped this bombshell: In actual fact, it lost $0.10 per share (nearly twice as bad as expected), and quarterly sales were only $25.2 million.

Although "we continue to see a significant shift in sentiment and sense of urgency by political leaders, industry, consumers, and the investment community to address our climate crisis," said Ballard CEO Randy MacEwen, the company nonetheless saw its sales fall 2% year over year. Moreover, gross margins on those sales slid 8 full percentage points to just 11%. According to a company press release, this was "driven by a combination of a negative net warranty adjustment, shift to lower margin revenue mix, and an increase in labor, supply and freight expenses."  

On top of all that, operating costs more than doubled year over year, eating up all of Ballard's gross profit and leaving the company with a loss.

Now what

Now, there's still the hope that an increase in volume of business will deliver the kind of economies of scale that can turn a fuel cell business like Ballard -- or Bloom, or Plug, or Nikola -- profitable. That's the hope investors were betting on yesterday as the federal government gets set to invest billions in renewable energy, and maybe that's how things will work out in the end.

On the other hand, Ballard reported this morning that its new orders recorded in Q3 ($20.5 million worth) didn't even replace the orders it filled in the quarter ($25.2 million), which implies that the business is not in fact gaining scale, or at least not consistently. And even with all that government money flowing into the renewable energy sector, analysts who follow Ballard still don't see the company turning a profit before 2025 at the earliest.

Meanwhile, it's already been 13 years since the last time Ballard saw a profit, and Bloom, Plug, and Nikola have never been profitable. Government infrastructure plan or no infrastructure plan, I really wonder how much longer Ballard and these other fuel cell companies expect investors to wait to see their patience finally pay off.

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.