Why Renewable Energy Group's Shares Jumped

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 biodiesel maker Renewable Energy Group (NASDAQ: REGI  ) jumped 15% today after the company reported earnings.

So what: The company sold 39 million gallons of biodiesel during the quarter, up 14% from a year ago, and net income rose from $14 million, to $46 million. On a per share basis earnings were $1.25 versus an expectation of $0.51 from Wall Street. 

Now what: The government retroactively reinstated the Biodiesel Mixture Excise Tax Credit, which accounted for the big jump in profit. Still, the strong increase in revenue is a positive sign, and the tax credit will give the company some stability this year. My biggest problem is the dependence on a tax credit, which will keep me from buying shares, because it's at the whim of Congress, not a position I want to be in with a big budget deficit in Washington.

Interested in more info on Renewable Energy Group? Add it to your watchlist by clicking here.


Read/Post Comments (2) | Recommend This Article (4)

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  • Report this Comment On May 03, 2013, at 9:27 AM, innv001 wrote:

    Obviously Travis Houim, doesn't understand the market for Biodiesel completely. The way it works is, when the tax credit goes away the way it happened in 2012, the price of RINS goes up and the price of Feedstock goes down, which compensates or preserves the margins.

    There's a government mandate for all biofuels including biodiesel. Biodiesel's mandate is in place till 2022 and will drive the Biodiesel market.

    If you want to participate in a green company, I would buy it, not sit on the sidelines.

  • Report this Comment On May 04, 2013, at 12:34 AM, DrGoldin wrote:

    By the time Congress stops nudging this one along, investors might have made their capital back several times over. I'm in it to win it, baby!

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