Fuel Tech drops on lower Q2 profit
Shares of Fuel Tech Inc. (Nasdaq: FTEK) have lost power on news before the opening that the provider of engineering solutions for the optimization of combustion systems in utility and industrial applications reported a decline in second-quarter results, disappointing Wall Street.
The net income for the three months ended June 30 was $0.3 million, or $0.01 per share, below the profit of $0.06 per share expected by 10 analysts polled by Thomson Financial. The Batavia, Ill.-based company booked earnings of $2.0 million, or $0.08 per share, during the same quarter of 2006.
Revenues also missed the mark. Net sales fell 18% to $16.2 million, from $19.76 million a year earlier. Analysts were looking for revenues of $18.47 million.
“Our results thus far are below our expectations, but reflect the timing of new project awards for each business segment rather than any fundamental shift in the markets for our products and services,” President and CEO John Norris said.
Specifically, Fuel Tech explained that net sales fell due to delays in signing new contracts for its U.S. air pollution business, and the winding down of two similar projects in China.
Nevertheless, Morris said he expects stricter air quality regulations to drive business.
“The outlook for new domestic air pollution control business has never been brighter as utilities begin to implement compliance strategies for [nitrogen oxides] emission requirements set to take hold in 2009.”
Daniel Mannes, vice president and senior research analyst with investment bank Avondale Partners, agrees.
“There is a lot of demand for what Fuel Tech does,” he said. “Coal power plants provide about 50% of the power in the United States and there is great need for energy efficient technology to comply with new environmental regulations.”
“Business is inherently lumpy, but I expect their financial performance to improve,” Mannes said. “They will grow their top and bottom line in 2008.”
Nitrogen oxides (NOx) emissions result primarily from the combustion of fossil fuels combine with other compounds in the air to form ground-level ozone, a major component of smog.
Fuel Tech also announced that it is looking to expand its business in China.
At 1:19 p.m. ET shares were down $2.62, or 9%, to $25.37. The 52-week high of $38.20 was reached on June 21. The 52-week low of $11.42 was set on Aug. 7, 2006.
