A hydrogen fuel-cell powered tractor
Jung Yeon-je / AFP via Getty Images
Shares of FuelCell Energy were rallying Thursday even though fourth-quarter earnings disappointed Wall Street, prompting a series of price cuts from analysts.
FuelCell (ticker: FCEL
) reported an adjusted loss of 7 cents a share, wider than Wall Street forecasts that called for a loss of 3 cents a share, on sales of $13.9 million. Analysts were predicting sales of $21.8 million in the quarter, according to FactSet.
Cowen analyst Jeffrey Osborne cut his price target on the stock to $5 from $7, citing concerns over the company’s ability to near a breakeven point by the end of 2022. Osborne maintained a Market Perform rating on the stock.
“Disappointing 4FQ results reflects the lumpy nature of the company’s project timing,” Osborne wrote in a research note. “We don’t expect clarity around future project start dates after seeing delays continue to emerge.”
The analyst also sees ongoing changes in legislation as a detractor for FuelCell. The company was poised to be a beneficiary of President Joe Biden’s Build Back Better plan, which would have awarded tax credits for hydrogen production. Now that the initiative pretty much been killed, the potential to benefit from these credits is no longer on the table.
On the state level, FuelCell also would have gained from a Connecticut state bill that would expand the solicitation process for new fuel cell generation products in the state. But “the implementation of the bill did not play out as expected,” Osborne said. In a Wednesday call with investors, FuelCell executives said they expected their bids to be too conservative.
“Management’s lower confidence in the company’s outcome in the overall process takes away a potential positive catalyst that we saw playing out in early 2022,” Osborne wrote.
Craig-Hallum analyst Eric Stine saw FuelCell’s earnings through a more optimistic lens. Stine upgraded the stock to Hold from Sell, and raised his price target to $5 from $4.
Despite the “ugly” fourth quarter, the analyst believes the stock is done or close to done going down. According to Stine, upward revenue estimate revisions are likely in the next year, with an improved product outlook and progress being made toward a carbon capture partnership with Exxon Mobil ( XOM
).
Both Stine and Osborne saw a potential upside in the company’s settlement agreement with Posco Energy in South Korea, which resolved legal disputes in the region and clarified FuelCell’s ability to access the South Korean and Asian market. As part of the settlement, Posco has agreed to buy $60 million worth of modules from FuelCell in 2022.
“Government policy supporting hydrogen in South Korea further strengthens sentiment around the outcome of the settlement,” Osborne said. “The settlement also opens new opportunities to pursue business in Japan where government policy for hydrogen in the country has also been favorable.”
FuelCell stock was up 7% to $5.47 on Thursday. The stock dropped 13% after reporting earnings Wednesday.
Write to Sabrina Escobar at [email protected]
