FuelCell Energy (FCEL) Incurs Wider-than-Expected Q2 Loss

FuelCell Energy Inc. (NASDAQ:FCEL) reported an adjusted loss of 56 cents per share in the second quarter of fiscal 2016, wider than the Zacks Consensus Estimate of a loss of 40 cents and the year-ago loss of 44 cents per share.

The wider-than-expected loss in the reported quarter was due to higher input costs and operating expenses.

Total Revenue

In the second quarter of fiscal 2016, FuelCell Energy’s total revenues were $28.5 million, missing the Zacks Consensus Estimate of $35 million by 18.6%. Total revenues were down 0.7% from $28.6 million a year ago.

Lower product sales and advanced technologies contract revenues primarily led to a drop in quarterly revenues. This was partially offset by higher service agreements and license revenues as a result of an increase in module exchange.

Highlights of the Release

In the quarter under review, FuelCell Energy’s total cost of revenues was $28.7 million, up 7.9% from $26.6 million in the prior-year quarter.

The company reported a gross loss of $0.16 million as against a gross profit $2.1 million a year ago.

Total operating expenses in the quarter were $12.6 million, up 16.7% from the year-ago figure primarily due to higher administrative and selling, and research and development expenses.

FuelCell Energy’s interest expenses were up 56.9% year over year to $0.98 million from $0.63 million a year ago.

Total backlog in the reported quarter increased 31.6% to $410.7 million from $312.2 million in the year-ago quarter.

Financial Update

Cash and cash equivalents as of Apr 30, 2016, were $81.9 million compared with $58.8 million as of Oct 31, 2015.

Long-term debt and other liabilities as of Apr 30, 2016, were $44.8 million compared with $12.9 million as of Oct 31, 2015.

Other Earnings Releases

Plug Power Inc. (NASDAQ:PLUG) posted a first-quarter 2016 loss of 5 cents per share, narrower than the Zacks Consensus Estimate of a loss of 6 cents.

Ballard Power Systems Inc. (NASDAQ:BLDP) posted a loss of 6 cents per share in the first quarter of 2016, wider than the Zacks Consensus Estimate of a loss of 4 cents.

Our View

FuelCell Energy continues to incur losses. The key takeaway for the company in the quarter under review was its increasing backlog. However, rising expenses continue to be a concern.

Post second-quarter fiscal 2016, the company entered into a contract with Exxon Mobil (NYSE:XOM) . The crux of the agreement is to jointly develop a technology to lower carbon emission by utilizing carbonate fuel cells, which could reduce costs and lead to a more economical pathway toward large-scale application globally. This agreement could potentially expand the acceptance of fuel cell technology among a wider customer base.

FuelCell Energy currently has a Zacks Rank #4 (Sell).

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