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Professional Credentials: The reports that I write are my personal research and opinions. They are not associated with any firm or organization, and are not intended to be taken as investment recommendations or advice. They combine my passions of economics, finance, writing and education, and... More
  • Strong Earnings Season For Biofuels 0 comments
    May 24, 2013 9:03 AM | about stocks: REGI, SYNM, BXIOF, KIOR

    This earnings season was a strong period for biofuels, and trends are in place that should be supportive through the rest of 2013.

    Renewable Energy Group (NASDAQ:REGI) started things off on May 1st.

    DateOpenHighLowCloseVolumeAdj Close*
    May 10, 201312.5012.6212.0012.48676,10012.48
    May 9, 201312.3412.9212.1212.75509,60012.75
    May 8, 201312.0012.4511.9612.28599,40012.28
    May 7, 201312.1012.1311.7511.97669,70011.97
    May 6, 201312.0012.2011.3912.03646,60012.03
    May 3, 201311.5012.0511.0711.851,127,20011.85
    May 2, 201310.6211.5010.0211.354,115,40011.35
    May 1, 20139.549.989.539.91293,2009.91

    The stock is up over 25% since that time. It closed at $12.48 today the 10th.

    Syntroleum (NASDAQ:SYNM) released on May 3rd.

    DateOpenHighLowCloseVolumeAdj Close*
    May 10, 20136.006.215.635.80103,7005.80
    May 9, 20135.546.215.545.96348,9005.96
    May 8, 20134.115.754.065.51493,7005.51
    May 7, 20134.,1004.16
    May 6, 20134.054.233.964.0537,8004.05
    May 3, 20134.204.203.994.0068,5004.00

    The stock is up 45% since that time. It closed at $5.80 today, the 10th.

    BIOX (OTC:BXIOF) released on May 9th.

    DateOpenHighLowCloseVolumeAdj Close*
    May 10, 20130.570.700.570.7080,4000.70
    May 9, 20130.620.620.500.5058,1000.50

    The stock is up 40% on the news. BXIOF.PK started the month at $0.41.


    KiOR (NASDAQ:KIOR) also released earnings on May 9th.

    DateOpenHighLowCloseVolumeAdj Close*
    May 10, 20134.314.564.274.37225,0004.37
    May 9, 20134.904.904.424.43409,9004.43

    KiOR is the only biofuels firm I track that didn't rally on the earnings news. It however is a bit different from the above firms in that it is a cellulosic biofuels company. KiOR closed down 1.35% today at $3.37.

    The first quarter earnings for these stocks were inflated because of the receipt of the 2012 tax credit. Income earned over the entire year of 2012 was in some cases totally accounted for in this quarter. That boost in earnings will not be repeated going forward. There are however trends in place that should be supportive for biofuels through the rest of 2013:

    1) The $1.00 tax credit passed.

    2) This year if there is a battle over the extension of the tax credit, it should boost RIN prices, not depress them like it did in 2012.

    3) Margins are currently strong, feedstock prices are stable to falling, fuel prices are stable to rising, RIN prices are strong with D4 RINs near $1.00.

    4) Production is lagging the level needed to reach 100% of the EPA quota, which should be supportive of RIN prices.

    5) RINs starts trading on the CME May 13th, and have been trading on ICE since May 7th, which should help the efficiency, confidence and remove fraud from this market.

    In conclusion, the economics that were disastrous for biofuels in the second half of 2012 have been reversed. RIN prices have strengthened, fuel prices have firmed, feedstock prices are relatively low and stable, the tax credit bill passed and 2013 production lags its quota target. All these factors combined to produce a very solid Q1 2013 earnings season. Current margins are strong, and the economics appear in place to continue this trend into and possibly through and beyond Q2 2013. Investors in this industry should pay attention to the margins as a way to gauge the potential fortunes of this industry.

    Disclaimer: This article is not an investment recommendation. Any analysis presented in this article is illustrative in nature, is based on an incomplete set of information and has limitations to its accuracy, and is not meant to be relied upon for investment decisions. Please consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SYNM over the next 72 hours.

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