What happened

Shares of natural gas and renewable natural gas provider Clean Energy Fuels (NASDAQ:CLNE) are up 25.1% at 12:25 p.m. EDT on March 13, following the release of the company's fourth-quarter and full-year 2018 financial results yesterday after market close. 

The company reported revenue and earnings numbers that both came in ahead of analyst expectations. Fourth-quarter revenue was $96.2 million, up 8% from last year, while GAAP net income came in at $6.9 million, compared to a $28.3 million net loss in the year-ago period. On a per-share basis, that works out to $0.03 earnings per share, while most analysts who cover the stock had projected a small loss. 

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Image source: Getty Images.

So what

It isn't just the solid revenue and GAAP earnings results that have Mr. Market excited today. Because natural gas commodity prices can swing wildly, looking at revenue alone doesn't always show whether the company is actually growing.

A measure that better shows what's happening with demand for its core business -- selling natural gas and renewable natural gas to transportation customers -- is volume, measured in gallon-equivalents, and this metric surged 14.2% higher in the quarter. That was easily the best quarter of volume growth Clean Energy Fuels has recorded in over a year. 

Clean Energy also took yet another big step in strengthening its balance sheet in Q4. At the end of the third quarter, it had $256 million in cash and equivalents, and $239 million in long-term debt and financing lease obligations (with $116 million of that due within 12 months). By the end of the fourth quarter, the debt and capital lease balance was $84.2 million, while cash and equivalents was over $96 million. 

With only $50 million in long-term debt remaining -- and that's not due until July 2020 -- and more cash than debt, Clean Energy's balance sheet is the strongest it's been in years. 

Now what

After a strong quarter of fuel volume growth, management is optimistic about 2019's prospects. On the earnings call, CFO Bob Vreeland said the company expects to see fuel volumes growth in the "low double digits" with per-gallon margins between $0.24 and $0.28, similar to 2018 profitability levels. 

That volume will be generated by the existing infrastructure and cost structure, meaning that the incremental value of those volumes will generate higher operating earnings. Based on the volume outlook, the company expects to generate adjusted EBITDA -- earnings before interest, taxes, depreciation, and amortization -- of $50 million to $55 million. 

On a GAAP basis, there's a pretty broad range of what earnings could be. A key tax credit -- the alternative fuels tax credit (AFTC) -- expired at the end of 2018. If that tax credit isn't renewed, the company expects a net loss of between $12 million and $18 million (though it would be cash flow positive due to its still-large depreciation/amortization expense). If the AFTC (which has significant bipartisan support and has been retroactively renewed multiple times over the past decade) is renewed, it would be worth between $25 million and $30 million to Clean Energy, directly on the bottom line. 

Add it all up, and it's understandable why the market is so upbeat on Clean Energy today.