FuelCell Energy: Buy This Stock to Beat the Recession

FuelCell Energy (FCEL) is advancing on its financial capabilities that should help the company to offer attractive financial options for its customers. On the other side, it should help the company to attain greater financial flexibility and returns going forward. For instance, the company during the quarter extended its PNC Energy capital to $30 million. This facility will not only provide capital for FCEL but also help the company to retain ownership of select projects while efficiently monetizing tax benefits.

Apart from this, NRG Energy has extended its $40 million committed five-year project finance facility.
This should help the company to better finance its construction phase and project finance for the next five years. So, these extensions of the credit facility will strengthen its business model and help the company to create value proposition for its investors.

Expanding manufacturing capacity

FuelCell is strategically expanding its manufacturing capacity. These expansions of capacity will help the company to strengthen its manufacturing operations and enable the company to reduce its costs and improve production going forward. For instance, the company during the fourth-quarter expended its North American manufacturing facility. It has completed the phase one for this facility and the company expects this extension to significantly drive its costs.

More importantly, the company is now enhancing and streamlining its logistics functions for the second-phase of the construction. These advancements in the manufacturing processes will enable the company to complete its backlog faster than expected and drive its top line growth going forward. The graphs below illustrate its revenue growth at full capacity as well as its global capacity in megawatts.

Strong end-market demand to drive its growth ahead

With solar installations increasingly bundling fuel cells and other energy storage technology, the company should benefit from the growing solar demand in the United States. As per Deutsche Bank, rooftop solar PV on residential is growing at a much faster rate than expected. In 2013, the United States had installed approximately 1GW on residential rooftops, slightly higher than total installed rooftop solar PV in Australia, with a fraction of the population. In fact, the report expects the US total PV installation on including residential, commercial and utility to grow to 16GW in 2016 from 5GW in 2013.  The chart below shows the growing installation of solar PV and capacity across the United States.

In addition, the company is developing new markets for its world class solutions. For instance, its advancement in carbon capture has been pretty strong. It has begged a couple of projects under carbon capture and SOFC/SOEC. Its $23.7 million DOE projects for carbon capture and approximately $15 million of SOFT/SOEC projects are progressing well. These projects upon completion will diversify its revenue platforms and drive growth in the long-run.

Conclusion

FuelCell is undeniably a good stock to hold in the long-run, given the boom in the solar market of late. It has strong backlog of revenue that provides better visibility of its top line growth in the future. Moreover, the company has extended its credit facility and expanding its capacity that should support its growth going forward.
Published on Jan 28, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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