Why FutureFuel's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of chemical maker FutureFuel (NYSE: FF  ) fell 10% today after the company reported earnings.

So what: Revenues fell 17% to $74.6 million in the quarter and net income fell 42% to $6.2 million, or $0.15 per share. Analysts expected revenue to be $82.2 million and earnings of $0.19 per share, so results were well short of what the market had already priced into the stock.  

Now what: The loss of the $1 federal blenders tax credit and a decline in demand for mandated usage were big impacts on the company. The company pointed to improving conditions near the end of the year, but I'd be cautious jumping in now. Subsidized businesses aren't popular in Washington right now, and a decline in revenue isn't a good sign for the company.

Interested in more info on FutureFuel? Add it to your watchlist by clicking here.


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  • Report this Comment On March 20, 2013, at 10:12 AM, ElCid16 wrote:

    This company definitely plays in an industry that has frequent ups and downs. I don't think that looking at one Q over Q comparison does any justice for analyzing this company.

    Looking at the past 5 years, the company's annual net income has been $34, 34, 23, 17, and 23MM. Assuming it can generate $25-35MM in earnings going forward, $12 is a pretty good price. The company has $150MM in net cash.

    Quarterly drops in earnings create shakeouts. Not a bad thing for long-term holders...

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