Why Ballard Power Systems Can Deliver Long-Term Growth

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Dec 30, 2014

Ballard Power Systems (BLPD) recently announced 21% improvement in third-quarter 2014 revenue to $20.6 million. The third quarter 2014 revenue also improved 11% sequentially on a quarter-over-quarter basis compared to second quarter of 2014. The company has also reset the revenue growth guidance to nearly 20%.

Earnings analysis

Ballard Power Systems reported 47% and 60% respective improvements in the third quarter ended Sept. 30, 2014 net income and earnings per share of ($2.4) million and ($0.02) respectively compared to net income and earnings per share of ($4.6) million and ($0.05) respectively during the same period last year. The company also resets the 2014 business outlook for improvement in adjusted EBITDA to be nearly 65%.

Making good progress

Ballard Power has signed several bus and backup power assembly contracts with Azure Hydrogen in China with work in progress for a micro-fuel cell contract and 2 other innovative aerospace contracts.

On October 8, Ballard signed a fresh long-term supply contract with Plug. Ballard targets on winning Plug's business by delivering superior-quality fuel cell stacks at reasonable prices coupled with top customer support. Going forward, Ballard is committed on delivering the best value to Plug. The opportunity of Plug seems to be attractive and exciting with continuous volume growth. During the third quarter, Plug supplied 857 GenDrive systems that represent an increase of 450% on a year-over-year basis. The customers comprise of Volkswagen (VOW, Financial), United Natural Foods (UNFI, Financial), Steel, Kroger (KR, Financial), Mercedes-Benz, Procter & Gamble (PG, Financial), Walmart (WMT, Financial) and BMW (BMW, Financial). Going forward, Plug estimates to ship number of GenDrive systems in 800 to 1,000 range during the fourth quarter, and it believes to close 2014 with a huge expansion of its order book.

Plug Power witnessed a threefold expansion of services and products orders in 2014 to $150 million illustrating impressive growth in fuel cells market demand.

Ballard also declared to launch the European service and parts center in November. This facility is believed to offer quicker, cheaper maintenance and repair convenience for the 27 Van Hool fuel cell buses expected to start their operations in Europe. It is expected to further solidify its value proposition to customers and enhance the overall relationships in the region.

New agreements

Ballard also signed a nonbinding agreement with bus operator in the Latvian City of Riga, a check bus OEM and the Skoda Electric. These agreements are believed to build solid relationships that are expected to finally deliver the leading HD7 modules. These modules are expected to probably replace diesel generators currently operated in trolley buses in the city of Riga in 2016.

Ballard supplied solar roofing solutions and turnkey engineering construction and procurement to leading customers such as Johnson Controls (JCI, Financial), Toyota (TM, Financial), IKEA, Frito-Lay, Coca-Cola (KO, Financial) and Walmart. Ballard acquired Solar Integrated in 2009 executing upon a vertical integration program in the solar industry.

Ballard has displayed excellent progress in offering cost-effective, functionality, performance, durability and reliability.

The investments made at present are believed to pay robustly in the future. Some key players like GE are reconsidering the benefits of fuel cells leveraged in nonautomotive applications. Ballard is believed to be the most solid brand in the fuel cell industry with superior technical abilities and innovation. Ballard is also expected to be a PEM fuel cells technology leader. It has invested more than $1 billion in product development and technology since the last 30 years.

At present, Ballard has approximately 2,700 Telecom Backup Power systems implemented worldwide with nearly 11 megawatts of nameplate power generation capacity. It has deployed more than 5,000 stacks in Material Handling having more than 10 million hours of run time. The fuel cell bus deployments have also reached nearly 70 buses to date. Ballard has removed singular adoption rate, singular product and singular market risk.

Ballard has signed a long lasting supply agreement with Plug Power Inc. for providing fuel cell stacks to be used in GenDrive systems implemented in forklift trucks.

Conclusion

So, on the back of new agreements, Ballard will be able to deliver revenue growth in the long run, making it a good investment.