It's hard to argue the auto battery business has been anything but a fixer-upper with a lot of potential up to now. But there comes a point when even a master mechanic has to cut his losses and move on to the next project. That's why this earnings season is so important for battery manufacturers who need to start showing revenue growth and decreasing cash burn.
Our first glimpse was mildly encouraging. Valence Technology
The first traction in the battery business appears to be in the commercial vehicle market. Last month, Frito-Lay, a division of PepsiCo
Previewing another quarter of losses
I am looking forward to hearing if our two big U.S. battery producers made any progress in the quarter when earnings are announced in November. A123 Systems
In developing businesses, sales growth will be first to materialize and analysts aren't expecting a lot, leaving room for companies to surprise on the upside. A123, for instance, had $23.6 million of revenue in the third quarter last year and expectations are for an increase only to $25.9 million this quarter. At Ener1, analysts expect more aggressive growth, from $8.1 million to $22.2 million.
Of course, neither American company will be profitable, something China-based Advanced Battery Systems
Is this bandwagon moving?
It's time for the battery business to start showing some signs of life before investors and car buyers give up on the business. A123 and Ener1 have built lots of capacity and if they don't start showing sales to fill that capacity, shareholders will be left holding the bag. Watch for revenue growth and updated forecasts for projects during earnings next week.
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Fool contributor Travis Hoium owns no shares in the companies mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.
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