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 biofuels maker FutureFuel Corp. (NYSE: FF ) dropped 20% today after reporting earnings.
So what: First-quarter revenues were down 11% to $82.2 million, and net income fell 55% to $6.3 million, or $0.14 per share. Analysts were expecting a decline in earnings but thought the company would make $0.17 per share.
Now what: The expiration of the $1 blenders tax credit was a huge hit to the bottom line, and lower volumes in FutureFuel's chemicals division didn't help. Long-term, the challenge is that demand for biofuels isn't increasing because other alternatives are proving to be more economically viable. Shares look cheap at 9.5 times trailing earnings, but I think this is a value trap, and investors should stay out of FutureFuel today.
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