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What's in the Cards for Plug Power (PLUG) in Q4 Earnings?

Zacks Equity Research

Plug Power Inc. PLUG is set to release fourth-quarter 2018 results on Mar 7, before the market opens.

In the last four quarters, Plug Power surpassed estimates twice for as many misses, the average negative surprise being 14.02%. In the last reported quarter, the company’s loss of 7 cents per share was narrower than the Zacks Consensus Estimate of loss of 8 cents.

In the past three months, the company’s shares have returned 14.8% compared with 5.8% growth recorded by the industry it belongs to.

Let’s see how things are shaping up for this announcement.

Factors to Influence Q4 Results

Plug Power believes that strength in the on-road electric vehicle markets, driven by the increased adoption of hydrogen fuel cell electric vehicles and the impact of new lease accounting standard will be conducive to its top line in the fourth quarter. Also, the company is optimistic about the prospects of other electric vehicle markets beyond material handling, supported by modular designs like ProGen engine, leading technologies and strategic partnerships with industry partners.

Plug Power has launched several premium products for warehouses and manufacturing facilities, which are expected to drive growth. Also, the vertical integration of key technologies into its products has enabled the company to improve product performance and reduce costs. As a matter of fact, Plug Power has an interesting lineup of product launches, which is likely to stoke growth in the quarter to be reported.

Moreover, the company focuses on investing in potential markets to drive long-term growth. For instance, it is looking to invest in fuel cells market, particularly in China, where it believes it has long-term potential. Further, the company believes that benefits from its cost-reduction efforts and greater operational efficacy will drive profitability in the quarters ahead.

However, rising operating expenses have been a major concern for Plug Power. In the third quarter of 2018, the company's operating expenses totaled $17.1 million, an increase of 0.5% year over year. We believe, if unchecked, higher costs and operating expenses will prove detrimental to Plug Power’s margins and profitability.

Also, international operations have exposed the company to risks arising from unfavorable movements in foreign currencies and geopolitical issues.

Earnings Whispers

Our proven model provides some idea on the stocks that are about to release earnings. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with Plug Power is given below:

Earnings ESP: It has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of 5 cents.

Plug Power, Inc. Price and EPS Surprise

Plug Power, Inc. Price and EPS Surprise | Plug Power, Inc. Quote

Zacks Rank: The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, its 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Key Picks

Here are some companies from the same space you may want to consider as our model shows that these have the right combination of elements to beat estimates this earnings season:

Chart Industries, Inc. GTLS has an Earnings ESP of +6.12% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kennametal Inc. KMT has an Earnings ESP of +1.68% and a Zacks Rank #3.

Rexnord Corporation RXN has an Earnings ESP of +3.40% and a Zacks Rank #3.

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