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On Thursday, UBS adjusted its outlook on Green Plains (NASDAQ:GPRE) Renewable Energy (NASDAQ:GPRE) shares, reducing the price target to $26 from the previous $28 while maintaining a Buy rating on the stock.
The revision reflects a tempered expectation for the company's second-quarter earnings due to softer ethanol margins and declining corn oil prices observed at the beginning of the quarter.
The firm has revised its second-quarter EBITDA estimate for Green Plains to $9 million, a significant drop from the initially projected $20 million. This change is attributed to the challenging market conditions the company faced earlier in the quarter.
Nevertheless, the outlook for the latter half of the year appears more optimistic, with EBITDA forecasts for both the third and fourth quarters being raised to $45 million from the prior estimate of $39 million.
The revised expectations are buoyed by the strong start to the third quarter for ethanol margins. Data indicates that Valero Energy (NYSE:VLO)'s ethanol indicator margin has seen a notable increase, moving from $0.33 per gallon in the first quarter to $0.56 per gallon in the second quarter. This improvement is anticipated to bolster Green Plains' second-quarter earnings by approximately $30 million relative to the first quarter.
Moreover, quarter-to-date ethanol margins have surged to $0.93 per gallon, signaling a potentially robust second half of 2024 for the company. In addition to the favorable ethanol margins, corn oil prices have seen a slight recovery, increasing by 5 cents per pound over the last four months, which is expected to have a positive impact on Green Plains' performance.
InvestingPro Insights
In light of UBS's revised outlook on Green Plains Renewable Energy (NASDAQ:GPRE), it's crucial to consider some key metrics and insights from InvestingPro that could further inform investors about the company's financial health and market position. According to InvestingPro, Green Plains is currently trading near its 52-week low, which may attract investors looking for a potential value play. Additionally, while analysts have revised earnings downwards and do not anticipate profitability for this year, the company's liquid assets do exceed its short-term obligations, providing some financial stability.
The real-time data from InvestingPro further reveals that Green Plains has a market capitalization of approximately $977.68 million and a negative P/E ratio of -12.12, reflecting the challenges in reaching profitability. The company's revenue has seen a decline of 17.62% over the last twelve months as of Q1 2024, with gross profit margins standing at 5.63%. Despite these headwinds, the company's EBITDA growth has surged by 526.75% during the same period, suggesting some underlying operational improvements.
For investors seeking more comprehensive analysis and additional InvestingPro Tips, there are 9 more insights available on InvestingPro. These tips could provide a deeper understanding of Green Plains' financials and market potential. To access these insights, remember to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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