Pacific Ethanol (PEIX) Tops Q3 Views as Spreads Firm; Cowen Maintains at 'Outperform'
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Rating Summary:
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Cowen and Company affirms Pacific Ethanol, Inc. (Nasdaq: PEIX) at Outperform with a price target of $16.50 following Q3 results released earlier this week.
Analyst Jeffrey Osborne noted that Pacific Ethanol's Q3 revenue of $275.6 million and adjusted EPS of $0.33 compared with his estimate of $262 million and $0.29, respectively.
Record Total Sale of 133.7 Gallons; Added Focus On Improved Efficiency and Feedstock Diversification
Pacific Ethanol shares have been recovering from a decline over Q3, resulting from what we characterize as an overreaction to ethanol price and inventory trends. In contrast, the company exhibited a continued strong ethanol/corn crush spread, especially as a result of its West Coast premium, with market fundamentals remaining markedly profitable. Based on an average 2.8 gallon yield per bushel of corn, Pacific Ethanol benefited from the following spread:
- Average ethanol sales price of $2.32 per gallon, a $0.30 premium over CBOT
- Average net cost of delivered corn of $1.27 per gallon ($3.56 delivered cost of corn per bushel, net of co-product revenue)
- Average Gross Profit of $1.05 per gallon, based on spread
Given strong cash generation, a LTM adjusted EBITDA of $96.9 million, reduced debt servicing, and cash over $50 million, the company is focusing more attention on improving yield, as well as diversifying feedstock capabilities across its plants. We expect management to highlight capital expenditure opportunities in more detail on the call, the potential for brownfield capacity additions, regulatory outlook, and expectations for commodity spreads in ethanol/corn, as well as co-product markets.
For an analyst ratings summary and ratings history on Pacific Ethanol click here. For more ratings news on Pacific Ethanol click here.
Pacific Ethanol closed at $12.78 yesterday.
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