As the world gradually transitions to a low-carbon future, companies have been investing significantly in hydrogen fuel cell technology. And with President Biden’s election, the industry is expected to get a significant boost because the new administration plans to spend heavily to address climate change while building a new, eco-friendly infrastructure ranging from transportation to energy.
On his first day in office, President Biden signed executive orders to rejoin the Paris Climate Agreement. He also signed an executive order to end the Keystone XL pipeline and revoke oil and gas development at national wildlife monuments. Biden is also expected to reverse the 2020 decision by the Trump administration to allow land development at the Bears Ears and Grand Staircase-Escalante national monuments in Utah and at the Northeast Canyons and Seamounts Marine national monuments in New England.
These actions, and the future goals of the Biden administration, should accelerate the demand for hydrogen energy and the accelerated adoption of fuel cell technology. Companies like Cummins Inc. (CMI) and Bloom Energy Corporation (BE) have been serving customers through ground-breaking innovation and access to leading technologies. So. given the optimism surrounding the industry, we think these stocks are set to soar this year.
Cummins Inc. (CMI)
CMI comprises complementary business segments that design, manufacture, distribute and service a broad portfolio of power solutions. The company operates through five segments: Engine, Distribution, Components, Power Systems, and New Power. Its products range from diesel, natural gas, electric and hybrid powertrains and powertrain-related components.
On November 12, CMI announced its plan to open a new fuel cell systems production facility for Alstom’s hydrogen trains in Germany. This expansion is expected to accelerate CMI’s hydrogen capabilities and will strategically strengthen its potential to be a leader in shaping the hydrogen economy.
Also in November, CMI finalized a joint venture–NPROXX and ETC–to provide customers with hydrogen products for both on-highway and rail applications. This venture is expected to accelerate the availability of hydrogen storage solutions thereby helping CMI to emerge as the hydrogen leader for commercial industries.
CMI launched a connectivity-enabled efficiency series engine and powertrain for Freightliner Trucks in December This engine allows the company to better support its customers over the lives of their vehicles by responding to future maintenance and service needs. The move shows CMI’s commitment to transform the company through extensive investment in technology solutions.
CMI’s net sales have increased 32.9% sequentially to $5.12 billion in the third quarter (ended September 27, 2020). Its operating income has improved 99.4% sequentially to $670 million over the same period, while its EPS has improved 81.3% sequentially to $3.39.
Analysts expect CMI’s revenues to grow 5.6% year-over-year to $5.29 billion in the current quarter ending March 31, 2021. A consensus EPS estimate of $3.27 for the current quarter represents a 2.8% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street EPS estimates in each of the trailing four quarters. The stock has gained 45.8% over the past year.
How does CMI stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #3 of 68 stocks in the Auto Parts Industry.
Bloom Energy Corporation (BE)
BE designs, manufactures, and sells solid-oxide fuel cell systems for on-site power generation. The Bloom Energy Server delivers reliable and resilient always-on electric power that is clean, cost-effective, and ideal for micro-grid applications. The company serves manufacturers, data centers, healthcare, retailers, utilities, and other industries.
On November 18 BE and SK Engineering and Construction (SK E&C) won a competitive bid under the RE100 program to supply 100% hydrogen-powered solid-oxide fuel cells (SOFC) and electrolyzers to an industrial complex in Changwon, Korea. This will allow BE to begin establishing its dominance in the foreign markets.
BE’s revenues have increased 6.6% sequentially to $200.30 million in the third quarter ended September 30, 2020. Its non-GAAP operating income has increased 152.5% year-over-year to $15.40 million over the same period, while its EPS has improved 66.7% year-over-year.
Analysts expect BE’s revenues to grow 32.1% year-over-year to $206.93 million in the current quarter ending March 31, 2021. The consensus EPS estimate for the current quarter represents an 85.3% improvement year-over-year. The stock has gained 324.5% over the past year.
It is no surprise that BE is rated “Strong Buy” with an “A” for Trade Grade, and Peer Grade, and a “B” for Buy & Hold Grade and Industry Rank. It is currently ranked #15 of 88 stocks in the Industrial – Equipment Industry.
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CMI shares were trading at $246.06 per share on Tuesday afternoon, down $0.48 (-0.19%). Year-to-date, CMI has gained 8.35%, versus a 2.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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