FuelCell Energy FCEL shares have declined 11.5% in the past month, wider than its industry’s decline of 7%. Earlier this month, the company reported its fiscal fourth quarter 2024 results, with earnings per share lower than the estimates.
In 2025, the company’s operation will be stronger due to its global restructuring, which will focus on FCEL’s core technologies on distributed power generation, grid resiliency and data center growth.
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FCEL’s Price Performance (One month)
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Factors Acting as FCEL Stock’s Tailwind
FCEL Energy is working on a global restructuring of its operations in the United States, Canada and Germany. This initiative will lower operating costs, realign resources toward advancing the company’s core technologies, and protect company’s competitive position amid slower-than-expected investments in clean energy.
Through restructuring, FuelCell Energy plans to prioritize commercially available technologies to reflect changing market opportunities with an updated strategic plan. The restructuring is likely to reduce operating costs by nearly 15% year over year in fiscal 2025.
As of Oct. 31, 2024, backlog increased by nearly 13.1% year over year to $1.16 billion compared with $1.03 billion as of Oct. 31, 2023, primarily as a result of the GGE Agreement entered into during the third quarter of fiscal year 2024. Backlog for the GGE Agreement has been allocated between product backlog and service backlog.
The company and ExxonMobil’s XOM unit, ExxonMobil Technology and Engineering Company, continues to work on the development of advanced technology that captures CO2 emissions directly from industrial sources while producing electricity and hydrogen simultaneously.
FCEL’s Estimates Moving North
The Zacks Consensus Estimate for FCEL’s fiscal 2025 earnings per share indicates year-over-year growth of 29.44%. The Zacks Consensus Estimate for FCEL’s fiscal 2025 revenues indicates year-over-year growth of 61.66%.
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FCEL Stock Returns Lower Than its Industry
FuelCell Energy’s trailing 12-month return on equity (ROE) is -18.54%, much lower than the industry average of 10.53%. ROE is a financial ratio that measures how well a company uses its shareholders’ equity to generate profits.
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FCEL’s Debt Level Lower Than Industry
FuelCell is utilizing lower debts compared with its industry peers to operate its business. The current debt to capital of the company is 16.86%, which is much lower than the industry average of 61.17%.
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FCEL’s Valuation
The company is currently trading at -1.81 on a forward 12-month P/E basis (P/E F12) compared with its industry’s 23.44X.
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Rounding Up
FuelCell Energy will benefit from the increasing acceptance of fuelcell technology in the long-term and increasing concern about rising emissions. The increasing backlog indicates an increase in demand.
Yet, the company is expected to incur losses in the near term and a negative return on capital. Thus, it is better to adopt a cautious stance for the Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Thus, investors who already hold FCEL stock should retain it, and new investors can wait for a better entry point, given its growth prospects.
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