Energy
Pacific Ethanol Faces Tougher Quarter After Beating Q3 Estimates
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Net sales were up 18%, which the company attributed to record total gallons sold as a result of increases in production and third-party gallons. Gross profit rose to $18 million, driven by higher production margins and more corn oil production. Operating income rose from $1 million in the year ago quarter to $13.6 million. On a GAAP basis, EPS totaled $0.15.
The company did not offer guidance, but consensus estimates for the fourth quarter call for EPS of $0.16 on revenues of $231.95 million. For the full year, analysts expect EPS of $2.42 on revenues of $1.07 billion.
Ethanol production gallons sold in the third quarter totaled 46.8 million, up from 37.1 million in the year-ago quarter. Third-party gallons sold totaled 86.9 million, up from 67.8 million a year ago. The bad news is that the sales price fell from $2.62 a gallon to $2.32 a gallon, and it is likely to fall further in the current quarter.
Investors do not need a weatherman to see which way the wind is blowing here. The ethanol suppliers, like Pacific Ethanol, can’t sell more because the market is already taking all it can at a 10% blend of ethanol to gasoline. Therefore, the price will almost certainly fall and demand will be stagnant.
Pacific Ethanol’s shares were down more than 9% at $11.60 in after-hours trading, in a 52-week range of $2.33 to $23.97. The consensus price target for the shares was $21.50 before the report.
ALSO READ: Why It Matters That Ethanol Prices Are Collapsing
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