FuelCell Energy Goes Up In Smoke

Clean Energy FuelCell Energy, Inc Struggles To Execute 

FuelCell Energy NASDAQ: FCEL is an interesting play on green energy technologies but the Q4 results prove only one thing, the market for this technology is tenuous because the technology itself is still in development. While we have great faith in the idea of hydrogen fuel cells for the long term, our faith in this company as an investment has been shaken. Efforts to reposition the company for success cut deeply into the bottom line and there are other issues to be concerned with as well. One such is the re-estimation of costs related to future module exchanges, a reestimation that is also cutting into the profit outlook and one that may not fully account for rising costs seen elsewhere in the economy. 

FuelCell Energy Misses On Top Line, Loss Widens 

The key takeaway from FuelCell Energy’s FQ4 earnings report is that revenue came in far below the consensus estimates and the net loss widened. The company reported $13.94 million in revenue for a decline of 18% versus last year missing the Marketbeat.com consensus estimate by $7.61 million or about 3,500 basis points. The big reason for the miss is a lack of module exchanges in the quarter, a lack that field a 100% decline in YOY services and licensing revenue. The electric generation segment, however, grew by 31% on efficiencies and growth of the footprint while the Advanced Technologies segment grew a smaller 14%. As far as the backlog goes, the backlog stands unchanged at $1.29 billion. 

Moving down to the earnings, the company posted a loss as expected but a much wider loss than what the analysts were predicting. The company’s loss widened on a number of factors that include impairment charges for discontinued projects and higher administrative, selling, and R&D expenses. What this means to the bottom line is a GAAP loss of $0.07 versus the consensus loss of $0.03 and possibly weaker than expected revenue and earnings in 2022 as well. 

FuelCell Settles Dispute With POSCO Energy 

FuelCell recently settled a licensing and distribution dispute with POSCO Energy that clarifies its access to the Asia markets. The ruling is in favor of FuelCell and opens the door to the South Korean market as well as markets in greater Asia. The deal allows POSCO to service existing installed clients in South Korea but no other rights are granted. What this means for FuelCell is at least 20 module exchanges in calendar 2022 with additional sales and service agreements expected. 

FuelCell Energy Is Diluting Shareholder Value 

FuelCell Energy has managed to get where it is now while incurring relatively low levels of debt but there is another concern to be aware of. The company has been selling shares to raise capital and may be forced to do so again at some point in the future. The most recent sale is for 44.1 million shares or about 12% of the new share count and is worth about $368 million. This brings the company’s cash balance up to $460 million or more than double its level last year providing ample capital for investment but greatly dilutes shareholder value.  The company is planning to up its investment dollars roughly 700% in fiscal 2022 to about $45 million. 

The Technical Outlook: FuelCell Energy Hits New Lows 

Shares of FuelCell Energy shed more than 10% in the wake of the Q4 results to hit the lowest levels in almost two years. Shares are trading near $5.00 after having hit the $500 level as recently as 2015 and they may head lower. While the technology appears to be interesting, and there are some clients, it does not appear to be gaining traction, and FuelCell is doing little but burning cash in an interesting way. We’ll keep our eye on this stock and this technology in case of a major development but until then, we’re on the sidelines in regard to FuelCell Energy.