FBR Capital Remains Bullish on FuelCell Energy (FCEL) Following 2Q
FBR Capital maintained an Outperform rating and $9.00 price target on FuelCell Energy (NASDAQ: FCEL) following the company's 2Q earnings report. Revenue of $28.6M missed consensus' expectations on weak product sales. The company cut FY16 guidance, from $170M–$210M, to $140M– $170M.
Analyst Carter Driscoll commented, "We are more cautious, near term, as project awards are slower to materialize, but we believe they will come. Weak F2Q16 results partly reflect the ongoing transition to more sale/leaseback projects, low-margin component kit sales to POSCO (which end in F4Q16), $2M in nonrecurring charges for rectifying past service contracts (hurt service margins, but should be over), and higher-than-expected product investments. Due to slower-than-expected awards from multiple RFPs that FCEL bid into in F1H16, the company cut FY16 guidance, from $170M–$210M, to $140M– $170M. We view this as a timing problem, not a demand issue. With 125MW worth of competitive bids over multiple potential projects, there is no shortage of demand; we believe FCEL stands to win at least a substantial portion of them. But the timing of awards appears tilted towards the latter part of FY16 rather than towards the current quarter. Once the RFPs are awarded, we see catalysts to drive strong revenue growth, including equipment sales for the 63.3MW Beacon Falls project, Connecticut's recently issued 50MW, DEEP RFP, and execution on Phase I for the carbon capture project with Exxon/DOE and PSEG's Long Island–based 40MW fuel cell RFP."
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Shares of FuelCell Energy closed at $6.12 yesterday.