Down 32% over the past year and about 42% from its 52-week high, Green Plains (GPRE) stock has been under significant pressure of late, to say the least. And with considerable debt on its balance sheet and a negative free cash flow over the past year, Green Plains doesn't necessarily seem like it would be at the top of most analysts' lists - at least, not in this particular macro environment.
Nevertheless, this small-cap stock is a Wall Street favorite, with most experts predicting major upside for beaten-down GPRE shares. Is this agricultural stock due for a comeback year - or overdue for a rerating by analysts? Here's a closer look.
About Green Plains
Founded in 2004, Green Plains is an agri-tech company that specializes in transforming renewable crops into high-value ingredients, primarily in the biofuel and animal feed sectors. It operates 10 biorefineries across the United States, with a combined annual capacity of over 1 billion gallons of ethanol (FLG24) production. Its market cap currently stands at $1.32 billion.
Along with low-carbon biofuels, renewable feedstocks, high-protein ingredients, and dextrose, the company also produces renewable corn oil and distillers grains. With continued focus on sustainability, the company aims to achieve carbon neutrality across its operations by 2050, and has invested heavily in carbon capture and sequestration technologies.
Solid Q3 Results
In the third quarter, Green Plains reported revenue of $892.8 million - down 6.5% from the previous year, but stronger than the consensus forecast of $815.33 million. The company attributed the revenue decline to lower weighted average selling prices on ethanol and distillers grains, as well as lower volumes sold on distillers grains. Otherwise, the company reported a yearly rise in volumes sold across all its key segments.
The company also reported EPS of $0.35, defying expectations for a quarterly loss, and much improved from the year-ago loss of $1.27 per share reported in the same period a year ago.
GPRE's progress toward profitability is worth watching. Currently, consensus estimates are calling for EPS of $1.59 in FY 2024, compared to the expected loss of $1.40 per share in fiscal 2023.
Meanwhile, the company's net debt of approximately $343 million is a point of concern, particularly given that GPRE is free cash flow negative. That said, the company has $200 million available under a committed revolving credit facility.
Goldman Sachs Says “Buy” GPRE Stock
After that Q3 report from Green Plains, renowned broker Goldman Sachs maintained its “Buy” rating on the stock with a $39 price target. In a note to clients, Goldman cited optimism over strategic moves like HiPro, Clean Sugar, and CCS (carbon sequestration), which it expects will eventually lead to expansion in operating profits for the company.
Separately, Craig-Hallum backed its own “Buy” rating and $39 price target on GPRE after earnings. This implies expected upside of more than 81% from current levels. The consensus is even more upbeat on GPRE, with the stock's mean price target of $41.78 representing a premium of 84%.
Overall, analysts have a rating of “Strong Buy” for Green Plains stock. Out of 8 analysts covering GPRE, 6 have a “Strong Buy” rating and 2 have a “Hold” rating.
