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Why Clean Energy Stock Just Dropped 22%

By Rich Smith - Updated Mar 11, 2020 at 10:21AM

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Amid a turbulent energy market, Clean Energy reports a Q4 profit.

What happened

Energy markets are looking more than turbulent this week as investors attempt to gauge the damage that a running feud between OPEC and Russia could do to energy stocks. And into the midst of this conflict stepped Clean Energy Fuels (CLNE 0.00%) last night, to report its fourth-quarter earnings.  

How did it do?

Expected to report about $0.16 per share in non-GAAP (adjusted) profits for its fiscal Q4 last night, Clean Energy reported $0.21 instead, and $0.20 per share under generally accepted accounting principles -- a beat on earnings. Sales for the quarter -- $119.6 million -- likewise exceeded expectations for $108.6 million (although sales for the year were down a fraction of a percent at $344.1 million).

Gallons of compressed and liquefied natural gas delivered grew 5% year over year to 103.3 million for the quarter, and were up 10% to 400.8 million gallons for the year.  

CNG Natural Gas fuel pump fueling a car

Image source: Getty Images.

So what

On the face of it, these seem like fine results. Clean Energy beat on sales and earnings, and grew its business in the process. So why is the stock down 22% (as of 10:50 a.m. EDT)?

In a note covered by today, analysts at Lake Street Capital may have touched on the problem: Although Clean Energy's performance was solid in both Q4 and in 2019 as a whole, the fact that oil prices have fallen so far, so fast, already in March suggests that alternative energy stocks like Clean Energy may face headwinds in 2020. Consumers seek alternatives to oil, after all, largely as a means of avoiding the high cost of oil.

Cheap oil, therefore, can be expected to diminish the attractiveness of the products Clean Energy is selling -- and the attractiveness of Clean Energy stock to investors.

Now what

Indeed, Clean Energy seems to see this writing on the wall. In guiding for what to expect in 2020, management forecast "approximately breakeven" profits -- a reversal of fortunes from the $0.10 per share Clean Energy earned in 2019, and a big letdown after what looked to be an accelerating business in Q4 (what with the company having earned twice as much in that quarter alone as it did all of last year).

The moral of the story: Investors like to own stocks that are growing. Judging from its guidance, that's not what Clean Energy expects to do -- not this year, at least.

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