Gevo, Inc. (NASDAQ: GEVO)
Gevo is having an incredibly rough day in the market today following the release of the company’s earnings yesterday after the closing bell. While earnings came in well ahead of expectations, the stock is still taking a dive. Today, we’ll talk about what we saw from earnings, how the stock reacted to the news, and whether or not there is still hope surrounding GEVO. So, let’s get right to it…
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GEVO Reports Strong Earnings
As mentioned above, Gevo reported its earnings for the second quarter yesterday after the closing bell, beating expectations. Here’s what we saw from the report:
- Earnings Per Share – In terms of earnings per share, GEVO did incredibly well, in my opinion. During the second quarter, analysts expected that the company would generate a loss in the amount of $0.27 per share. However, the company actually reported a loss of $0.15 per share in the second quarter. Not only did this narrower loss blow expectations out of the water, but it also showed strong year-over-year growth from the loss of $0.66 reported in the same quarter last year.
- Revenue – While revenue wasn’t quite as strong as earnings, we saw slight year-over-year growth in this figure as well. During the quarter, GEVO generated revenue in the amount of $8.11 million. This figure shows slight growth over the $8.9 million in revenue reported one year ago.
Following the release of the relatively strong financial results listed above, Dr. Patrick Gruber, GEVO CEO, offered this statement:
“The first half of 2016 has been a significant inflection point for Gevo. We have achieved a number of key milestones year-to-date, including restarting isobutanol production at Luverne, demonstrating successful commercial airline flights using our fuel, signing a key distribution agreement with Musket targeting the specialty fuel markets, and strengthening our balance sheet to include $22.6 million in cash as of the end of the second quarter.
I am pleased that all operations, including the distillation system, at our plant in Luverne are up and running and that the fermentations are going well. In fact, we are seeing up to 20,000 gallons of isobutanol per batch, and we remain on track to achieve our cost targets. While the technologies are working, we still need to continue the plant optimization learning curve, tuning our attention to shortening batch cycle times and, given the importance of jet and isooctane, tailoring specific grades for those applications, particularly as it relates to the design of a large scale hydrocarbon plant.
On the market and sales front we have made good products. Conducting commercial airline flights using our AT J was a tremendous milestone. While all the testing had previously been completed during the six years of work with ASTM International, flying actual flights with our jet fuel demonstrates to people that this really can be done commercially. We are grateful to Alaska Airlines for being a good partner and we continue to have positive conversations with several potential customers in the aviation industry. We also made further progress in the development of the gasoline blendstock markets. We are extremely pleased to have a national player such as Musket as a partner, and it is good to see they are already distributing isobutanol-blended fuel into their customer network…”
How The Stock Reacted To The News
As investors, one of the first things that we learn is to watch the news during earnings season. After all, a strong earnings report could send a stock skyrocketing while a negative report could lead to big declines. While the report that was released by GEVO after the closing bell yesterday was positive, we’re seeing a negative reaction. Honestly, I can’t quite see why, but that’s what’s happening. Nonetheless, currently (12:18), the stock is trading at $0.56 per share after a loss of $0.19 per share (25.68%) thus far today.
What I’m Expecting To See Moving Forward
Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from GEVO. In fact, I believe that the losses we saw post-earnings are unfounded. At the end of the day, the earnings report went incredibly well. Not only did earnings come in well ahead of expectations, the report showed strong year-over-year growth as well as a strengthening financial position.
I’m also incredibly impressed with some of the things that were mentioned by Gevo CEO Pat Gruber. First and foremost, in his statement, he outlined the fact that the company is currently in talks with others in the aviation industry. Considering the global shift to clean energy, I believe that these talks will end well. I’m also excited that Musket has already started the distribution of isobutanol-blended gasoline, as I believe that this will drive strong revenue in the long run.
I know that there is one big concern on the minds of investors; that concern is delisting. As I’ve said in the past, I’m not expecting GEVO to get delisted. At the end of the day, there are too many options out there for the company to allow that to happen. At the moment, I am awaiting news with regard to the 6-month extension. This, in my opinion, should buy enough time to avoid a reverse split all together.
At the end of the day, GEVO is still a pre-profit company, and I think that’s what’s making investors nervous. However, in my opinion, there are few opportunities like this that we see at any given time. The truth is that the company has the right product at the right time. Mix this with the fact that they are working hard to really commercialize this product, and I believe we have a winner. All in all, I’m expecting to see growth ahead that turns today’s declines into opportunity.
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What Do You Think?
Where do you think GEVO is headed moving forward and why? Join the discussion at TalkTRENDZ!
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