Shares of biorefining company Green Plains (GPRE 1.13%) jumped as much as 26.1% in trading on Wednesday after the company reported fourth-quarter 2023 financial results. Shares closed the day up 13%.
Moving to higher-margin products
Management said revenue fell from $914 million a year ago to $712.4 million as ethanol sold fell from 225.2 million gallons to 215.7 million gallons in the quarter. But revenue was much higher-margin than a year ago and net income was $7.2 million, or $0.12 per share, a huge improvement from a loss of $38.6 million a year ago.
Green Plains also said it will initiate a "strategic review process to explore all opportunities to enhance value," which often indicates looking for a buyer of the company.
Activist shareholder Ancora is pushing for a sale of the company and it looks like it's at least getting its way in making management look at other options. For now, the focus on non-ethanol products is helping margins.
Better results ahead?
Investors are starting to see some of the value in Green Plains unlocked by a focus on higher-margin products. There has been extreme volatility in ethanol margins over time and products like clean sugar technology are helping.
While some of the jump in shares is likely from management looking into strategic options, it's more important that the company is reporting positive net income. I think that's what Green Plains needs to fall back on, whether it finds a buyer or not.
