Shares of FuelCell Energy (FCEL) have been under heavy pressure over the past several weeks and months, plunging more than 25% and 65% over the respective thirty days and six months. And if you’ve bought and only held the stock since its 52-week high of $29.44 on February 9, you’ve experienced a decline of as much as 81%.
But can FuelCell, which manufactures green and blue hydrogen fuel cell systems for a wide variety of applications, re-energize its share price? That's what the market wants to know. That answer will be more clear when the maker of hydrogen fuel cells reports third quarter fiscal 2021 earnings results after Tuesday’s closing bell. As the trillion-dollar infrastructure bill moves forward, FuelCell Energy must show it can play a significant role in the expected spending spree.
Momentum in green hydrogen sector has not fully reached the levels of six months ago, but there is some evidence that the market is starting to feel more optimistic about the industry’s prospects. Aside from a progressing global agreement to move toward clean energy, President Joe Biden’s trillion-dollar infrastructure bill is headed for a vote in the House on Sept. 27. The package includes $8 billion for hydrogen projects.
FuelCell Energy, which continues to advance new technologies like carbon capture and hydrogen generation, is one of several companies that stands to benefit from the spending. Wall Street analysts are forecasting a year-over-year increase in earnings on higher revenues when FuelCell Energy. If achieved, this could be a powerful factor that could catalyze FuelCell’s near-term stock price. But with competitors like Plug Power (PLUG) and Ballard Power (BLDP) also fighting for position, on Tuesday the market will want to know how realistic FuelCell’s growth targets remains.
In the three months that ended July, Wall Street expects FuelCell to to lose 5 cents per share on revenue of $21.19 million. This compares to the year-ago quarter when the loss came to 8 cents per share on revenue of $18.73 million. For the full year, ending January, the loss is expected to be 30 cents per share, narrower than the year-ago loss of 42 cents, while full-year revenue of $72.34 million would rise 2.1% year over year.
Despite the projected 5-cent quarterly loss, it represents a year-over-year increase of almost 30%, while revenue of $21.19 million would rise 13%. These are meaningful figures given how nascent the green hydrogen industry remains. FuelCell also seeing demand from what’s called the clean-up of the grey hydrogen — an industrial gas space that has grown to be $175 billion per year industry, representing a massive opportunity not only from a plant-building perspective, but also from contracts to maintain the infrastructures.
What's more, FuelCell’s generation portfolio, an important segment, continues to perform well, posting record revenues in the most-recent quarter. The generation segment which is expected to be a key contributor to the company’s profitability targets. Notably, the company’s balance sheet is also improving each quarter as both long term and total debt have declined by an average of 78% and 50% respectively over the last two quarters.
Though execution risk exists, the market recognizes the company’s considerable market potential. Not to mention the growing social and corporate appetite to lower the country’s carbon footprint. And this is where FuelCell has to sell its growth capabilities. And if it can do that, the stock price will respond favorably.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.