Due to report third-quarter earnings on Nov. 2, Ballard Power Systems (NASDAQ: BLDP) is, arguably, the gas cell firm closest to attaining profitability. Through the primary six months of fiscal 2017, Ballard reported a 104% improve in adjusted EBITDA over the identical interval final 12 months. And though the corporate is much from constantly holding the underside line out of the pink, there are indicators that the corporate is transferring in the suitable course. Will the third quarter replicate even higher momentum? Let’s have a look at some issues we are able to anticipate administration to handle.
On the street…
Accounting for 36% of Ballard’s high line in fiscal 2016, heavy-duty motive represented the second largest phase by income, but it surely demonstrated the most important year-over-year improve, at 170%. Besides the tram market, the phase, which largely displays Ballard’s success in badembly China’s demand for fuel-cell automobiles, consists of fuel-cell options geared towards the bus and heavy-duty truck markets.
Image supply: Getty Images.
Arguably, Ballard’s success predominantly is determined by its success within the heavy-duty motive phase, so it is one thing on which buyers must be keenly centered. Management, for instance, could present coloration on an $18 million provide contract, signed in June, for 400 fuel-cell engines which can be to be built-in into buses and vehicles in main Chinese cities. According to administration, vital deliveries for this contract, and one other for 200 engines with the identical buyer are anticipated to happen within the second half of 2017. Combined, the 2 provide contracts are valued at $29 million.
…and within the warehouse
Besides the heavy-duty motive market, Ballard’s gas cells could be present in materials dealing with tools, largely due to a provide settlement it signed with Plug Power (NASDAQ: PLUG) in 2014. According to the phrases of the deal, Ballard will provide the fuel-cell stacks for Plug Power’s GenDrive system by means of 2018 and has the potential for 2 one-year extensions.
During the earnings report, it will likely be attention-grabbing to see how administration addresses — if in any respect — Plug Power’s settlement with Amazon.com, which was introduced final spring. Speaking to the settlement, Plug Power’s administration acknowledged that it might acknowledge as a lot as $70 million in fiscal 2017 and $600 million general. In addition, Plug Power, in its Q2 earnings report, acknowledged that it signed a brand new settlement with Wal-Mart. According to Plug Power, it is going to deploy 10 GenKey websites in 2017 and, doubtlessly, an extra 30 websites by 2019. Investors, subsequently, ought to look to see how this interprets to Ballard, whether or not it is a rise in income in Q3 or a rise in orders to be delivered in This autumn or later.
In a category by itself
Among its hydrogen-oriented friends, Plug Power and FuelCell Energy (NASDAQ: FCEL), Ballard is the closest to proving that the fuel-cell trade could be worthwhile.
BLDP EBITDA (TTM) knowledge by YCharts.
The firm’s efficiency in fiscal 2017 could elucidate this level even additional. During its Analyst Day presentation, administration famous that it will likely be “about adjusted EBITDA positive” if the corporate studies fiscal 2017 income of $108 million — the badysts’ consensus estimate. Investors, subsequently, ought to affirm that the corporate achieves badysts’ Q3 income estimate of $28.four million and that the corporate is on observe to attain administration’s gross margin forecast of 35% for the 12 months. Through the primary six months of the 12 months, Ballard has reported a gross margin of 38%, so buyers shouldn’t be dismayed if the corporate’s gross margin falls under 35%.
For these hitching their hopes to a hydrogen-powered future, Ballard presently provides buyers the best alternative. Nothing is for sure, although, as the corporate nonetheless has loads of hurdles to beat earlier than it turns into a worthwhile endeavor. Continued success in China and a rise in orders badociated to Plug Power’s take care of Amazon will definitely be inexperienced flags for the corporate. I, nevertheless, will probably be most to see if the corporate stays on observe to fulfill annual income and gross margin estimates — two issues that will energy the corporate on the street to profitability.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of administrators. Scott Levine has no place in any of the shares talked about. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure coverage.