Industrial production increased by 0.4% in September and 2.9% at an annual rate in the third quarter. However, the sector is facing headwinds that could hamper growth. The industry is struggling with challenges related to the shifting economic climate, attributed to the stubbornly high inflation and consequent rate hikes.

Moreover, the consistent supply chain issues have been among the biggest disruptions for the past few years. And Russia’s invasion of Ukraine has been intensifying supply chain concerns as economic sanctions against Russia are increasing.

Additionally, the U.S. factory sector is expected to slow in the coming months amid rapidly rising interest rates, a switch in consumer spending to services, and a broad economic slowdown both domestically and in Europe and China.

Hence, we think industrial stocks Plug Power Inc. (PLUG) and FuelCell Energy, Inc. (FCEL) are best avoided or sold short, given their bleak fundamentals.

Plug Power Inc. (PLUG)

PLUG is a leading provider of comprehensive hydrogen fuel cell (HFC) turnkey solutions. The company offers end-to-end clean hydrogen and zero-emissions fuel cell solutions for supply chain and logistics applications, on-road electric vehicles, the stationary power market, and more.

On August 25, PLUG signed a hydrogen supply deal with Amazon (AMZN) to provide liquid green hydrogen starting in 2025 to help Amazon’s commitment to be net-zero carbon by 2040. However, the company is not expected to benefit immediately from this deal.

During the second quarter that ended June 30, 2022, PLUG’s total operating expenses increased 131.9% year-over-year to $114.44 million. The company’s operating loss rose 63.9% from the year-ago value to $146.91 million. Its net loss increased 73.9% year-over-year to $173.30 million, while its loss per share grew 66.7% year-over-year to $0.30.

Street estimates PLUG’s EPS to decline 16.4% year-over-year to negative 0.95 for the fiscal year ending December 2022. Moreover, the company has failed to surpass the consensus revenue estimates in three of the trailing four quarters.

Over the past year, PLUG has plunged 41.4% to close the last trading session at $19.11. The stock has declined 32.4% over the past month.

PLUG’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an F grade for Stability, Sentiment, and Quality and a D for Growth and Value. It is ranked #89 of 90 stocks in the Industrial – Equipment industry.

To see PLUG’s POWR Rating for Momentum, click here.

FuelCell Energy, Inc. (FCEL)

FCEL develops, manufactures, produces, constructs, and services high-temperature fuel cells for clean electric power generation. The company offers solutions for various applications, such as on-site power generation, combined heat and power, carbon capture, and hydrogen-based storage. It serves commercial enterprises, utilities, hospitals, and governments.

For the fiscal 2022 third quarter ended July 31, 2022, FCEL’S loss from operations increased 164.5% year-over-year to $28 million. Its adjusted EBITDA loss rose 301.5% year-over-year to $20.77 million. The company’s net loss, attributable to common stockholders, widened 136.1% year-over-year to $30.21 million. Its net loss per share grew 100% from the year-ago value to $0.08.

FCEL’s consensus EPS estimate of negative $0.33 for the fiscal year ending October indicates a decline of 7.5% from the same period last year.

FCEL slumped 64.5% over the past year to close its last trading session at $3.1. The stock has declined 34.4% year-to-date.

FCEL’s POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.

FCEL has a grade of F for Stability, Sentiment, and Quality and a D for Value. It is ranked #86 in the same industry.

Beyond what we’ve stated above, we have also given FCEL grades for Growth and Momentum. Get all FCEL ratings here.

PLUG shares were trading at $17.92 per share on Wednesday morning, down $1.19 (-6.23%). Year-to-date, PLUG has declined -36.52%, versus a -21.28% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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