Clean Energy Fuels (CLNE, Financial) disappointed the street with its fiscal first-quarter results that lagged behind the street expectations. Surprisingly, after three consecutive quarters of exceeding the analysts’ EPS consensus, the company failed to continue this in the recent quarter. In fact, the disappointing numbers came, even after reporting considerable growth in its sales volume. But the problem is more on a macro level and not in the fundamentals of the company. Let’s see in detail what can we expect from Clean Energy in the days to come.
Looking past the quarter
Its revenue for the quarter declined 9.9% from a year ago period to $85.85 million, while losses adjusted for one-time gains widened to 32 cents a share compared to a loss of 30 cents last year. On the other hand, gallons delivered rose 27% to 75.2 million gallons compared to last year. Therefore, it is clear that the fall in revenue was on account of weak commodity prices, while its sales volume remains strong.
This further proved from the fact that, in spite of a tangible drop in oil prices, auto companies are set to launch new models fitted with natural gas engines. In fact, lower oil prices forced the industry to reduce incremental cost in natural gas trucks.
Positives to note
Positive cues are coming in from macroeconomic factors, and oil and gas prices are expected to rally again. This is good news for the company, as on hand on hand it would increase its top line, at the same time its losses will be reduced.
To sustain this growing fleet, Clean Energy is opening additional fueling stations across the country that will support its existing customers. For instance, the company has signed an agreement with Dean Foods (DF, Financial) to build a private CNG fueling station to fuel 64 trucks at their Oak Farms Dairy plant in Texas. It has signed a number of such deals, and it will play a decisive role in its future growth.
However, IMW still remains a matter of concern for the company. Weak oil prices coupled with the strength in U.S. dollar have significantly impacted its sales in the recent quarter. Taking firm steps in this direction, the company has right-sized its business and made significant product enhancements. It has standardized its compressor design which will decrease the shipping time and make its manufacturing more efficient. Interestingly, things are getting better in the second quarter, and the company is getting orders from across the world including China, Vietnam, Eastern Europe, Canada and Mexico.
Conclusion
All in all, Clean Energy is making the right moves, which will benefit the company in the coming years. Its P/S ratio is quite attractive at 1.75 compared to the industry average of 3.01, indicating that its stocks look undervalued at current prices. Unfortunately, this is the only metric to support its growth in the present scenario. Although its future seems promising but it seems prudent to wait for the moment to get more conformations from other financial metrics as well.
