FuelCell Earnings Preview: FCEL revenue beats but EPS misses

Update: FuelCell Energy (FCEL) reported earnings before the open. EPS was worse, $-0.08 versus $-0.06 but revenue was ahead $43.1 million versus $35.2 million. FCEL stock is down 4% in the premarket at $3.83. 

FuelCell Energy (FCEL) reports Q3 earnings before the open on Thursday. The stock remains under pressure, so earnings will be closely examined to see if there is any reason to arrest this trend. 

FCEL stock earnings preview

FuelCell is expected to report earnings per share of $-0.06 and revenue of $35.2 million. FCEL stock has been under pressure as the company missed earnings last time out when it posted a much wider loss than had been expected. Q2 earnings were released on June 9. EPS was $-0.08 versus consensus at $-0.05. Revenue was $16.4 million, which was nearly half of where consensus stood at $32.6 million. Naturally, its stock suffered and fell 6% on the earnings release.

Since then FCEL stock has largely traded sideways. This period coincided with the summer relief rally in equities, which partly explained the sideways move despite poor earnings. All in all, the stock remains challenged and is down 31% so far in 2022. Despite it being in the green energy space, it has failed to benefit from interest in the sector. FuelCell produces fuel cell stations based largely on hydrogen power. 

FuelCell has big problems, and until management address these it is too early to invest in my view. The company is running consecutive losses with no sign of profitability in sight. In the last three years, gross losses have increased from $1 to $12 million. In the same period revenues have increased by nearly 20%, so something is not working here. In Q2 FCEL said the large loss was down to costs. If a company cannot control its cost base and margins, then it will always be a difficulty.

Revenue is falling fairly consistently.

Gross profit is a gross loss and is all over the place.

Costs are rising.

Net income is consistently trending lower and lower.

Source: Refinitiv

FCEL stock forecast

Based on the above charts this looks too risky for my portfolio. Management needs to give some strong guidance as to how they plan to turn things around before it would tempt me, and I would need to see some tangible signs of success. That is not to say momentum cannot be a short-term factor, but right now I do not see this as a longer-term play. The market tends to agree, given its performance this year. $3.18 is supported on the chart and then the June low at $2.87 would be the target. The recent spike has failed at the 200-day moving average, another bearish signal. Breaking this 200-day moving average would be required to change momentum, but that seems unlikely.

FCEL daily chart