Rentech Blows Away Estimates

Earnings season is not traditionally kind to Rentech (RTK) investors. For years, the stock drifted lower as the company posted loss after loss.

Yesterday could not have been more different. Rentech not only posted actual earnings, but it increased guidance. It reported net income of $36.1 million, or $0.22 per share, versus a loss of $0.05 per share in the prior year quarter. Rentech now expects 2009 EBITDA to exceed $25 million. That’s up from prior estimates, but not a linear projection of current trends. Either the company expects next quarter to be more challenging, or is trying to dampen expectations.

Macroeconomic forces were a big help this quarter. One of its largest inputs, natural gas, is scraping multi-year lows. At the same time, its outputs — synthetic fuel and fertilizer — still garner fairly high prices.

Dan Cohrs, Executive Vice President and CFO, said

We are pleased to report our first profitable quarter ever. The cost reductions we implemented in addition to exceptional management of our fertilizer business have provided us with a foundation from which we can continue to execute on our alternative energy strategy. We believe Rentech is well-positioned to capture the opportunities that have resulted from the approval of our jet fuel for commercial aviation as well as from the renewable power and low carbon fuel mandates in California.

Shares popped over 100% yesterday, so some of the upside is already baked into RTK stock price. Another 50% or so wouldn’t surprise me though.

Rentech Corp. (RTK)

DISCLOSURE: No position.

Comments

[captainccs:]

>>> At the same time, its outputs — synthetic fuel and fertilizer — still garner fairly high prices.

Rentech does not yet produce synthetic fuel in commercial quantities. While that is the objective of the business, it still has not been achieved. Commercial quantities of fuel should start in 2010 at the Illinois fertilizer plant.

Also, we have no idea of how the cost of RenDiesel and RenJet will compare with competing fuels so it's a bit early for high fives.

That said, I'm more than happy with the price doubling and I expect RTK to be a multi-bagger going forward as the various projects come on line.

Disclosure: Long RTK

Aug 11 09:20 AM

[einstein p ...:]

The company blew away earnings estimates and got approval to use its synthetic fuel for commercial airliners, after getting an order from the US Air Force last June. All big milestones for the firm. As the price of oil move up again, the price of RTK should soar. There is a long way to go on the upside on this stock.

Aug 11 09:31 AM

[Delbert:]

The primary long term mover of RTK stock is not the price of oil, but the need to reduce (or eliminate?) our dependence on foreign oil..
The Government should use some of that "stimulus" money to accelerate the commercial production of "Renjet" fuel......

Aug 11 11:38 AM

[famos:]

I agree with Delbert's comments, i.e., Rentech & similar companies, such as Syntrolium should receive federal stimulus assistance to accelerate the U.S. separation and dependence from foreign oil while providing use of cleaner fuels.

Aug 11 01:10 PM

[einstein p ...:]

I agree that we should reduce or eliminate our dependence on foreign oil but, if history provides a guideline, that would require the price of oil to escalate as a catalyst for change.

Either way, RTK is a beneficiary and the stock price should begin to reflect the core fundamentals of the company. Right now, the company is under covered by Wall Street analysts and undervalued.

Aug 15 09:24 AM

[einstein p ...:]

Like I said, it was undervalued and it still is even after the run up today. This company is now firing on all cylinders.

Aug 18 03:30 PM

[bunchie:]

This stock will definitely be a winner. In it for the long run. Short traders will mess it up and play away the full potential of this stock. Headed to the air show to see the product first hand in Detroit.

Aug 21 11:22 AM