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Gevo Q4 Earnings preview: Watch out for ethanol sales

Shares of the biofuel firm Gevo (NASDAQ: GEVO) has been volatile since June last year after the company decided to go for a reverse stock split. It touched a 52-week low of $1.79 in December. However, in January, the company recovered modestly after the company signed a partnership with Avfuel to supply jet fuel for the aviation industry.

Gevo is scheduled to publish its results for the fourth quarter tomorrow after the bell. Street expects the loss to be narrowed to $0.66 per share compared to $4 in the prior year. Sales is expected to improve 20.1% to $8.02 million by the analysts. All eyes will be on the management tomorrow to see whether it’s able to beat analyst estimates.

The company has started off 2019 with a good note. In January, it unveiled the capability to develop renewable isoprene, which is used for making rubber and related products. According to Gevo, isoprene market is touted to be $4 billion by 2025, annually growing at or above 7% based on the auto sectors performance. With huge unmet need, the firm believes this would contribute nicely to the top line in the near future as it starts commercial development.

In February, Gevo inked a deal with HCS Group to supply renewable isooctane over 10 years period, which is worth $180 million. The planned expansion of the Luverne facility would help Gevo to increase production of isobutanol, isooctane and renewable jet fuel. Investors would be more upbeat about the deal as this would be accretive to earnings and would also provide stable revenues.

Research firm H.C. Wainright expects Gevo’s revenues to touch $140 million in 2025. The company would be ending fiscal 2018 with revenues of $33 million to $34 million. It also upgraded the rating to Buy from Neutral with a target price of $10 based on the various initiatives taken by the firm to drive profitability.

Gevo gets lion’s share of revenues from sales of ethanol and related products. The decrease in fuel prices has impacted the firm in the past two quarters with increasing losses. The bottom line also is impacted by increased expenses. One can expect the firm to continue the trend in the Q4 period.

In the last quarter, revenue came in at $8.6 million, up from $7.7 million last year. Adjusted loss per share was $0.85 and loss on non-GAAP cash EBITDA basis stood at $4.2 million over $3.4 million loss in the prior year period. The renewable firm failed to meet analyst estimates on the earnings front, however revenues surpassed estimates.

For the fiscal 2018 period, Gevo expects revenues to be between $34 million and $37 million. It also forecasts ethanol sales at 19 million gallons and animal feed product at 56,000 tons.

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