Fuel-Tech reiterated with buy
Financial services firm Merriman Curhan Ford & Co. reiterated its “buy” rating on Fuel-Tech, Inc. (Nasdaq: FTEK) on news that the developer of technologies for air pollution control, process optimization, and advanced engineering services announced a teaming agreement with ITOCHU Hong Kong Ltd.
Under the terms of the agreement, Fuel-Tech will perform at least one FUEL CHEM program on a combustion unit in the People's Republic of China. Fuel-Tech will share its technology without giving up rights to its valued IP, while ITOCHU will bring established connections along with a strong local presence.
Fuel Tech's FUEL CHEM program uses specialized technology, known as “targeted in-furnace injection.” The technology is designed to offer energy efficiency gains, reduce air pollutant and CO2 emissions, reduce operating and maintenance costs, and improve safety for power plants and other combustion units.
The agreement is welcome news for the Illinois-based company, as ITOCHU has a significant interest in finding ways to play the “greening” of China, and sees great opportunity in the Fuel Chem product, said Merriman Curhan Ford & Co. analyst Jessie Herrick in today’s research note. ITOCHU sells a range of products and services to Fuel-Tech’s prime target market comprised of combustion unit customers.
Herrick notes that ITOCHU’s established footprint in the People’s Republic of China, coupled with its large sales force, creates business opportunities for Fuel-Tech.
Herrick said he is adjusting the quarterly revenue breakdown on the air pollution control of Fuel-Tech’s business for fiscal year 2007. Specifically, $1.5 million is being shifted from the current quarter into the fourth quarter of 2007 to account for the timing of orders associated with the tightening of emissions standards in 2009.
However, Herrick is maintaining his full fiscal year 2007 and 2008 earnings estimates on Fuel-Tech. For FY 2007 and 2008 Merriman Herrick forecasts earnings of $0.42 per share on revenues of $90.4 million, and $0.71 per share on revenues of $117.4 million respectively.
The consensus of 10 analysts polled by Thompson Finacial is $0.41 per share for fiscal year 2007 and $0.67 per share for fiscal year 2008.
Fuel-Tech currently trades at 40 times Herrick’s fiscal 2008 earnings estimates. Herrick’s estimates Fuel-Tech will grow revenue by 20% and EPS by 48% in fiscal year 2007.
Shares of Fuel-Tech climbed 18.6% or $5.33 to a fresh 52-week high of $34.02 in midday trading Wednesday.
