FuelCell Energy (NASDAQ- FCEL) reported its third quarter 2022 financial results on September 8th. The report is characterized with higher revenue coming out ahead of expectations, however, more execution risks and stock dilution, hurting the company’s appeal.
FuelCell Energy stock reacted favorably to the quarterly results, rising 14% to $4.37 or a two-week high. The stock is also boosted by the approval of the Inflation Reduction Act that raised hydrogen stocks long-term prospects.
The fuel cell technology developer reported revenues of $43.1 million compared to $26.8 million year over year and a gross loss of $(4.2) million compared to gross profit of $1.1 million at Q3 2021. The higher revenue is a result from a delivery of six additional modules to Posco Energy as part of the recent settlement agreement.
The company is chronically suffering from a high backlog that came at $1.284 billion as of July 31, 2022, compared to $1.299 billion as of July 31, 2021. It remains sufficiently elevated compared to industry’s average as FuelCell is having troubles executing its booked projects.
That is mostly due to technical issues related to its fuel cell modules and errors in management. To fix those issues, the company plans to increase spending in fiscal year 2022 of up to $50 million to update its existing products, fund research and development activities and expand production capacity.
The Q3 results also revealed relentless stock dilution that is hurting investors’ optimism. The company has diluted its stock massively to fund its operation. Some shareholders don’t see that as a positive sign as it decreases their ownership and stake in the company.
What is troubling is that the company is doing that to fund operations as it lacks the ability to generate income from its core business.
Overall the quarterly results reveal a slightly improved picture in terms of revenue growth but continued poor performance in relations to profit generation and existing projects execution. An investment in FuelCell Energy stock is considered highly risky by the market and could be avoided for now until we see improved fundamentals.