What happened
Shares of Clean Energy Fuels Corp. (CLNE 3.07%) dropped 10.5% in August. Virtually all of the drop occurred on August 4, the day after the company reported a loss for the second quarter of 2017.
Coupled with a controversial decision earlier in the year to sell the company's renewable natural gas production facilities to BP (BP 0.58%), investors clearly decided to take this opportunity to sell, which sent the stock down.
Clean Energy Fuels is selling more fuel than ever, but revenue and earnings are down. Image source: Clean Energy Fuels Corp.
So what
It's no big surprise that a quarterly earnings loss would send investors heading for the exits, and Q2's major numbers looked particularly bad. Revenues were down 25% year over year, with station construction revenue and compressor revenue down an alarming 41% and 41.7%, respectively. That hit earnings hard. The company went from $3.6 million in adjusted net income in the year-ago quarter to a $15 million loss in Q2 2017. Ouch!
The few bright spots in the numbers weren't all that bright. Fuel volumes sold continued to rise -- as they have, steadily, since 2010 -- and were up 6.6% year over year. The company also managed to reduce its expenses by 13% from a year ago, which is a good thing.
The company is also facing some tough comparables in the year-ago quarter. For one thing, the federal renewable fuels tax credit (volumetric excise tax credit, or VETC) expired at the end of 2016, which zeroed out what had been a $6.5 million quarterly revenue line for Clean Energy. Also, the sale of the company's renewable natural gas production facilities to BP means that Clean Energy now has to pay BP for the fuel it sells to its customers, reducing the amount it makes on each gallon. That explains why volumes could go up while revenue on those volumes went down.
But a tough comp doesn't make the quarterly loss any easier for investors -- or their portfolios -- to stomach.
Now what
Long-term investors in Clean Energy Fuels like me have watched in dismay as our $15 (or more) shares have fallen to $10, then to $5, and finally to below $2.50 -- an all-time low -- in August. Things look pretty bleak, but there are some arguments for continuing to hold on to the stock -- or possibly even buying more shares.
First of all, the company is in a much better financial position after the asset sale to BP. The sale allowed Clean Energy to reduce expenses and pay down debt. It's also possible that the VETC may be reinstated this year, which would improve the bottom line significantly. Finally, sales volumes continue to grow through thick and thin.
That said, there are also significant obstacles to growth, including the continuing oil price slump, which makes natural gas less competitive as a cost-saving option, and continuing advances in electric vehicle technology. Still, if you've come this far, it's probably worth it to hang on to your shares and see what happens in the next few quarters.
