Plug Power Inc (NASDAQ: PLUG) Released Q2 Earnings Yesterday

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Yesterday, alternative energy company Plug Power Inc (NASDAQ: PLUG) released its quarterly earnings report for the second quarter of the 2014 fiscal year. The company reported positive earnings due to a gain related to stock warrants.

The company posted a net income of $3.8 million, or $0.02 a share. This is a huge improvement from the second quarter last year in 2013, when Plug Power posted a net loss of $9.3 million, or $0.14 per share.

Sales had increased by more than 100 percent from $7.5 million to $17.3 million during the same quarter one year ago. These results were influenced by an increase of $9.6 million due to the chage in fair value of common stock warrants that were issued previously.

Gross margins increased by 17 percent, and the company announced predictions for its gross margins to hit the mid-20’s by the end of the fourth quarter this year.

Not including the growth, the company saw an adjusted loss of $0.04 per share in the second quarter, which met the expectations of three analysts.

Analysts are now inclined to give Plug Power a Sell rating due to concerns that would make it difficult for investors to gain positive results from investments in the company. Some of the concerns are rooted in the company’s dwindling net income and struggling operating cash flow.

Net Income

The company has seen significant changes in its net income this quarter from the same quarter one year ago. On the basis of this number, Plug Power has severely underperformed compared to the S&P 500 and the industry of electrical equipment. Its net income has fallen sharply by 784.5 percent from the second quarter of 2013, dropping from -$8.58 million to -$75.86 million.

Additionally, the company’s decline in revenue held it back from performing at the average in the industry of 7.5 percent. Since the second quarter from one year ago, Plug Power’s revenue dropped by 13.5 percent.

The company’s struggles with its revenue has had a negative impact on its bottom line as well, and has dragged down Plug Power’s earnings per share. While the last few quarterly earnings reports have shown rather volatile earnings, it is possible that Plug Power’s earnings per share is on track to grow in the upcoming year. In the past year, Plug Power has been losing money – it reported earnings of -$0.79 per share from -$0.94 per share a year earlier. This year, the company forecasts earnings per share to improve to -$0.09 from -$0.74.

Cash Flow

Plug Power’s net operating cash flow has also dropped by 49.83 percent to -$8.89 million from the same quarter one year ago. When comparing that figure to the average in the electrical equipment industry, Plug’s rate of growth is significantly lower.

Source of Strength

The company’s saving grace may be its return on equity, which has significantly grown compared to its return on equity from the same quarter one year earlier. This is a beam of light in an otherwise dark and dejecting report for the alternative energy company. However, compared to other firms in the industry and the market overall, Plug Power’s return on equity is still far behind the industry average as well as that of the S&P 500.

Andy Marsh, Plug Power’s CEO stated that customers are noticing the improvements and the lack of problems with the company’s newer units.

Additionally, analysts are optimistic about Plug’s installation of its GenKey technology for one of Wal-Mart Stores Inc (NYSE: WMT)’s distribution centers, located in Pottstown, Pennsylvania. The installation is expected to help drive Plug Power’s sequential growth throughout this year.

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