The recently concluded COP28 has highlighted the global leaders' consensus on transitioning from fossil fuels due to their effect on climate change. This outcome puts pressure on countries to hasten their transition to climate-friendly alternatives. Indeed, it opens up a new avenue for companies offering alternative fuel products like ethanol to benefit from this transition.
Biofuels are fuel alternatives derived from animal waste or plant materials and can help fight global warming. According to the National Renewable Energy Laboratory, biofuels positively impact the environment as there's very little buildup of greenhouse gas emissions compared to their fossil fuel equivalent. This puts biofuel companies at a massive advantage as demand will continue to pick up to support the transition, and these three biofuel companies are the best ones to check out right now.
The Andersons, Inc. (ANDE)
Andersons, Inc. isn’t primarily focused on biofuels; the company is engaged in various sectors like agricultural supply chains, renewables, and plant nutrients. Its operations fall under three segments:
- Trade: for its logistics across commodities and merchandise;
- Renewables: for its ethanol, ethanol-related products, and ethanol refining plants;
- Plant nutrients: for distribution and manufacturing of its plant nutrients.
The company ended its third quarter with solid results due to its renewables segment. The company achieved a record pretax income of $47 million on robust performance in its ethanol plants. Its President and CEO, Pat Bowe, is confident that the company will meet its full-year adjusted EBITDA outlook of $350-$375 million. The company has also made strategic moves to fuel its future growth, like its acquisition of ACJ International, and enhanced its position in other markets. Even with challenges in the market, like its currency-related losses in Egypt, the company pulled through by focusing on domestic grain flows and its Nutrient and industrial segments. With sound management and a positive outlook, the company is worth looking into as a potential biofuel company to buy.
Green Plains Inc. (GPRE)
Green Plains is a biorefining company specializing in various technologies for fermentation, agricultural, and biological development and utilization of crops into renewable and sustainable value-added ingredients. The company produces ethanol, protein, and renewable corn oil under its ethanol production segment, procures grains for its commodity marketing, and ethanol production under its agribusiness & energy services segment. Furthermore, Green Plains is working toward finalizing the acquisition of its partnership company, Green Plains Partners LP, after its announced definitive merger agreement. The company expects the transaction to simplify its corporate structure and have solid governance over its future and interests.
GPRE reported strong performance in its latest quarter; in particular, its net income turned positive from a previous net loss. The company also reached a plant utilization rate of 93.9%. Green Plains's CEO, Todd Becker, also highlighted its performance due to hitting new volume and sales records with its Ultra-High Protein. Last, the company is making strategic collaborations with companies like Equilon Enterprises LLC to improve its fermentation, processing, and mechanical separation processes that can liberate corn oil distillation for ethanol and high protein production.
REX American Resources Corporation (REX)
Last on our list of biofuel stocks is a holdings company that operates in the ethanol and by-products segment. REX American Resources Corporation has ethanol operations focused on ethanol, non-food grade corn oil, and natural gas products being processed in over six ethanol production facilities. These operations are done via subsidiaries like NuGen Energy, LLC (NuGen) and One Earth Energy, LLC (One Earth). The company is strongly committed to sustainability and changing the world through technology.
The company’s latest financial quarter reported solid results in gross profit and net income, driven by its 10.4% increase in ethanol sales and 323.7% gross profit increase, resulting in a significant jump in its net income. Rex Americans's CEO, Zafar Rizvi, states this is the company's best quarter in its 39-year history as it highlights the results of its effort to focus on expansion and operational efficiency alongside its commitment to sustainability. The company also holds a strong balance sheet that can help with its future growth plans. With a solid quarter, strong management, and solid expansion plans, this biofuel stock could be the best one buy.
Final ThoughtsThe mission to a safe and cleaner environment is here to stay. With various countries continuously finding solutions to contribute to the fight against climate change, it's no longer a question of whether companies specializing in biofuels will go out of style. The main question now is, which one will lead the pack?
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
