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Fuel Tech's clean air technologies cut nitrogen-oxide emissions from coal-burning plants and utilities by up to 85%. Phenomenal sales since 2005 have seen shares almost quintuple to $38. But a poor Q2, lowered annual guidance of $0.30-$0.35/share on $80M-$85 million in sales, and an order backlog of just $9M cut shares to $28. Short sellers hold 40% of FTEK's shares on fears of overvaluation (at 100 times earnings) and increased competition from giants like General Electric. But Barron's says historically uneven quarterly results are misleading, and that the company's P/E growth ratio valuation of 1 is reasonable. Sales of Fuel Tech's coal by-product cleaning solutions rose 30% in Q2, and company-wide backlog rose by $20M during August-September. CEO John Norris says Q3 orders could surpass $28M, and that Q4 financials will be "exceptional" -- and that's before tapping the Chinese market's potential. Stricter pollution regulations will force the 1500 coal-fired U.S. plants to seek emissions solutions. Fuel Tech has 30 factories signed up and profuse interest from others. With $30M in cash, no debt, 40% gross margins and significant insider holdings, bulls see FTEK shares reaching $45 and higher. One analyst says signing up just one-third of U.S. coal-powered plants will push the stock to $100 by 2009-2010.

FTEK 1-yr. chart:

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Source: Fuel Tech Shares Should Clean Up - Barron's