FBR Capital Cuts Price Target as FuelCell Energy (FCEL) Cuts Revenue Guidance
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FBR Capital reiterated a Market Perform rating on FuelCell Energy (NASDAQ: FCEL), and cut the price target to $2.50 (from $3.00), after recent setbacks cause the company to lower its F4Q16 revenue guidance. FCEL guided F4Q16 revenue to $23M–$25M, lower than consensus forecasts. Part of the reduction was from not winning any clean energy awards and part from the reclassification of a fuel cell plant constructed for Pfizer that was originally expected to be sold but will be accounted for as a sales leaseback transaction.
Analyst Carter Driscoll commented, "This morning, December 1, FCEL lowered its F4Q16 revenue guidance after its recent setbacks regarding awards from certain clean energy RFPs. The company is cutting head count to lower its cost structure to better align production levels with its order book, cutting the annual production rate to 25 MW from 50 MW. FCEL is reducing head count by approximately 17%, or 96 positions, primarily in direct manufacturing but also some administrative positions, and taking a $3M charge in FY17, 50% of which is expected to be in cash severance costs. Additionally, the company hopes to lower operating costs and save $6M in annual opex. We believe these steps are the appropriate responses to the loss of expected awards in the aforementioned clean energy RFPs. Until we have more clarity that the reduced production levels are truly temporary in nature, we are taking a more conservative outlook for fuel cell power generation aimed at utility-scale projects and have lowered our revenue estimates and price target to $2.50 from $3.00."
Shares of FuelCell Energy closed at $2.25 yesterday.
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