Buying Rentech on Upside Earnings Potential

| About: Rentech, Inc (RTK)

Analysts, on average, expect Rentech (NYSEMKT:RTK) to report a loss of $0.01 per share on sales of $45 million on February 10, 2011. For the full year, analysts expect the company to post a loss of $0.05. In the year-ago period, the company reported a loss of $0.07 on sales of $27 million.

In the previous quarter, the company reported a loss of $0.04, missing consensus estimates for a loss of $0.02.

Trading desk rumor is that Rentech will beat the estimate and investors will be pleasantly surprised. I believe buying Rentech ahead of earnings is a smart move and short sellers would be wise to cover. I have written several articles on Rentech and still believe this company has exciting prospects along with huge growth potential. I have bought a decent size position ahead of earnings and will buy more after the report. December of 2010 Rentech had a 52 week high of $1.48.

If earnings are better than expected, the stock should easily surpass the 52 week high. Several analysts currently have a $2.50 price target on Rentech. I believe the stock will see $3 by this year. Watch for potential earnings estimates raised along with analysts upgrades.


Rentech, Inc. (Rentech) is a provider of clean energy solutions. The company owns and operates a nitrogen fertilizer plant in East Dubuque, Illinois, that manufactures and sells natural gas-based nitrogen fertilizer products within the corn-belt region in the United States. It is developing energy projects to produce certified synthetic fuels and electric power from carbon-containing materials, such as biomass, waste and fossil resources. Its technologies can produce synthesis gas (syngas) from biomass and waste materials, and convert syngas from its own or other gasification technologies into complex hydrocarbons (the Rentech Process) that are then upgraded into fuels using refining technology that it licenses. In addition to developing projects using these technologies, it is pursuing the licensing of its technologies to developers of projects that are expected to produce fuels and/or power

For a more in depth description read my prior articles.

In December 2010, Rentech announced that it has been selected for the second consecutive year as one of the "50 Hottest Companies in Bioenergy" by Biofuels Digest, the publisher of a biofuels daily newsletter. In a release, Rentech said its position advanced in rank from number 38 to number 25 from over 1000 eligible energy companies worldwide, reflecting Rentech's advancements in bioenergy.

Commenting on the award, D. Hunt Ramsbottom, Rentech President and CEO, said:

We are honored to be recognized by the industry for our demonstrated renewable synthetic fuels and power technologies and the high value renewable products they produce. This award reinforces Rentech's leadership position within the bioenergy industry. The renewable fuels and power projects we are developing will play an important role in our world's clean energy future.

Biofuels Digest editor Jim Lane said:

For the second year in a row, the voters have been getting more excited about Rentech. This year, they've leapfrogged a lot of great companies in reaching #25 in the world, out of more than 1,000 eligible companies. Drop-in renewable fuels have been big all year, and Rentech continues to be a leader in that evolving story.

New World Investing’s Michael Murphy has Rentech on his list for Top Buys Long-Term. Michael Murphy has only 8 stocks in this list and for Rentech to be one is a privilege.

I recently invested in Capstone Turbine (NASDAQ:CPST) under a $1.20 a share. I sold 50% of my holdings at $1.50 to buy Rentech. Capstone was just upgraded by Ardour Capital to a buy; it reports positive cash flow. Price target is $1.80

Disclosure: I am long RTK, CPST.