When faced with a negative analyst report that appears inaccurate, companies have several methods of addressing the issue. Immediately issuing a press release or holding a conference call to address the analyst typically doesn't help. The move appears very defensive to investors. Using an earnings call to clearly present the facts from the quarter to attack the questionable analysis typically is the most efficient.
In the case of Clean Energy Fuels (NASDAQ:CLNE), executives were faced with this dilemma back in mid-October when Piper Jaffray issued a report claiming the company didn't support the preferred trucking fuel of compressed natural gas (CNG). All investors knowledgeable on Clean Energy knew that report to be flawed, but the stock still slumped anyway. (see Clean Energy: What Was Piper Thinking?)
On the earnings call, the company did a fantastic job of providing indisputable data points refuting the claims regarding the lack of support for CNG. The odd point in the whole story were the claims by Chart Industries (NASDAQ:GTLS) that the particular analyst visited a plant in Minnesota where only CNG tanks are manufactured while the Georgia plant is working on 20 liquefied natural gas (NYSEMKT:LNG) tanks.
Regardless, Clean Energy has made no bones that it doesn't care where the trucking transportations fuel market heads, as long as it uses natural gas. The company is the leader in both CNG and LNG fuel options and is working hard at renewable natural gas (NYSE:RNG). Everybody knows the claims were baseless yet the stock continues to trade as a damaged investment.
During the earnings call, the CEO provided the following details highlighting the leadership in CNG:
- Fuel 7,000 CNG busses everyday.
- Fuel 6,000 CNG refuse trucks everyday.
- Built 43 CNG stations at 37 airports to fuel several thousand vehicles each day.
- Fuel several dozen trucking firms at public access stations.
- Five large fleets including Frito-Lay, 99cent Only Stores, Saddle Creek Corp., Rowan Transportation, and Central Freight Lines purchased 370,000 gallons of CNG during October.
Those details should put to rest any claims that Clean Energy isn't focused on the CNG market, but if those numbers don't help the ultimate bottom line is that it sells more gallons of CNG. In fact during Q313, the below table from the 10-Q highlights how it sells more than double the CNG gallons over LNG:
While the details on the new Cummins (NYSE:CMI) - Westport (NASDAQ:WPRT) engine and the build out of America's Natural Gas Highway place the company and the industry on the cusp of unprecedented growth in LNG, the company continues to plug along with solid gains in CNG. During Q3, the gallons delivered rose 17% over last year's quarter. The vast majority of the increase in gallons sold was for refuse customers using CNG. Beyond the fuel number, the revenue and earnings numbers get very complicated to compare each quarter.
When striping out construction revenue that fluctuates on a quarterly basis and BAF that was sold to Westport, the company saw revenue surge 23%. On top of those exclusions, the numbers become even more confusing if one excludes the fuel tax credits of $6 million in Q313. Either way one looks at it, most investors see that the total revenue number dropped from $91.5 million to $86.3 million. In the case of what is suppose to be a high growth stock, the lack of consistent reported growth is a deterrent to the stock.
The bottom line though is that the gallons of fuel sold increased by 17% to 56.4 million gallons and ultimately the growth of this number will determine the success of the stock.
Chart is a leading manufacturer of equipment needed for production, storage and end-use of hydrocarbons such as LNG. In the recent Q313 earnings report, the company confirmed strong order activity for LNG equipment including the recent award to build 20 fueling stations for a major oil company. Also, Chart indicated that on-vehicle LNG fuel tanks in North America ran at record levels during the third quarter. All of the data points from Chart provide more conformation that the LNG market is progressing contrary to the statements from Piper.
The stock has been under pressure with earnings not meeting expectations, but the company continues to show signs that LNG is a strong, growing segment at least in North America. From a Clean Energy investors point of view that is all that matters.
The re-test of the $11 level was probably a great time to enter a position on this stock. As the chart below shows, over the last three years it has held at that level for all but a few days:
With solid details from Clean Energy Fuels on the progress being made in CNG and confirmation from Chart Industries on the growth in LNG equipment, investors should now be comforted that the Piper discount should disappear. Clean Energy Fuels is now on the cusp of faster growth as the heavy-duty, long haul trucking segment picks up steam. Each truck in this segment can use 20,000 gallons of LNG fuel in a year and the fleet customers that have already ordered trucks or have plans for deploying LNG trucks will alone add 35 million gallons of fuel a year. The stock is attractive for a long-term position as the market develops full speed ahead now.
Disclosure: I am long CLNE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.