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Summary

  • Clean Energy continues to report disappointing earnings with q4 gallons delivered only growing 13%.
  • Earnings estimates for 2014 and 2015 continue to plunge.
  • A potential stock of the year is quickly turning into a flop.

In what has become a quarterly tradition, Clean Energy (NASDAQ:CLNE) reported Q413 results that generally disappointed the market. With the promise of the new Cummins (NYSE:CMI) - Westport (NASDAQ:WPRT) 12-liter engine opening up the long haul, heavy-duty truck markets, investors had long expected an earnings call by early 2014 to contain some outlandish growth figures and expectations. Instead, the company delivered more promises of a developing market while providing little actual results.

Along with Westport Innovations, Clean Energy offers investors potential huge returns from developing natural gas as a transportation fuel in the refuse, airport, and trucking industries, yet the end results are continued losses. At the same time, Tesla Motors (NASDAQ:TSLA) has greatly revolutionized the electric car market, pushing the stock to the stratosphere. Ironically, more issues exist with a electrical vehicle that still uses a coal based power generation system and limited charging options, yet a visionary leader as managed to convince the market and automobile buyers. The same can't be said for natural gas transportation. Or maybe it's a general lack of focus on the part of Clean Energy and Westport where both companies are attempting to develop a wide set of products to capture the whole market instead of a narrow focus.

In the case of Clean Energy, it spends a great deal of the Q413 earnings call discussing the renewable natural gas called Redeem, yet it only counts for about 15% of gallons sold. On a similar basis, Westport spends a lot of focus on locomotive and ship engines, yet the company hasn't proven out the original case of using CNG or LNG for trucks.

Mediocre Results

The best thing that can be said about the Q413 results was the continued progress towards developing natural gas transportation as a fuel source with gallons delivered up 13%. The company provided the following highlights for the quarter:

  • Gallons delivered for the fourth quarter totaled 55.5 million, compared to 49.0 million delivered in the same period a year ago.
  • Revenue for the fourth quarter was $85.0 million, compared to $99.1 million last year, which included $22.7 million in construction revenue for two stations sold last year.
  • Adjusted EBITDA for the fourth quarter of 2013 was $(1.8) million, compared to adjusted EBITDA of $(5.7) million in the same period last year.

In general, the revenue and earnings totals are difficult to decipher due to the constantly shifting construction revenue totals and the volumetric excise tax credit (VTEC) that wasn't applied consistently over the last couple of years due to tax laws. The ultimate number catching the eyes of growth investors is the lackluster 13% volume growth.

Earnings Estimate Trends

With so many moving parts, the ultimate trend for a stock is usually reflected in the earnings estimate trends. In this case, analyst estimates in the table below continue to turn more negative on the Clean Energy story, suggesting the company previously over hyped expectations for both 2014 and 2015.

(click to enlarge)

* data provided by Yahoo! Finance

The worse part of the scenario is the dramatic increase in expected losses for 2015. Analysts now expect at least a $0.51 loss during the year with the low estimate reaching $0.74. The 2015 expected loss is even larger than the $0.44 loss reported for 2013. Typically stocks struggle to show gains when the net loss declines over a two-year period. The number is likely to continue trending towards a higher loss with more analysts adjusting numbers after the recent earnings release.

America's Natural Gas Highway Update

The America's Natural Gas Highway continues to be a mitigated failure. The company originally expected to end 2013 with a vast network of open stations serving the heavy-duty trucking industry. Now two months into 2014, Clean Energy released on the earnings call that it only has 24 stations open with 85 completed and awaiting customers. Even worse, the company can't provide any general details and guidance regarding the end of year numbers.

Sure a large majority of the delay was due to the extended timeline to get the Cummins Westport 12 liter engine version needed for LNG into production last August. Now though, it appears Westport suggested that the target engine sales for 2014 might be closer to 6,000 than 10,000. Again, Clean Energy management provides some of the general excuses with customers testing engines and the uptake that usually takes place after a year of testing, similar to what occurred in the CNG refuse and transit markets several years back. Unfortunately, the experience of the initial issues with CNG vehicles weren't applied to the general understanding in the development of the LNG market.

Conclusion

Clean Energy was originally touted as a potential stock of the year for 2014, but the latest news suggests the year is getting off to a very slow start. Until the company can overdeliver on promises, the stock will languish and investors should avoid it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Source: Clean Energy: Heading Towards Flop Of The Year