On Wednesday, Scotiabank adjusted its outlook on Clean Energy Fuels Corp (NASDAQ:CLNE), lowering the price target to $6.00 from the previous $7.00. Despite the reduction, the firm maintained its Sector Outperform rating for the company.
The analyst believes that the fourth-quarter results of 2023 will not significantly affect the share price in the short term. The company's adjusted EBITDA surpassed consensus expectations, which was partially attributed to insurance proceeds from an LNG plant incident, a factor that may not be fully valued by the market.
In the recent earnings report, Clean Energy Fuels (TSX:EFR) provided a new level of detail by separating adjusted EBITDA for its fuel distribution and RNG (renewable natural gas) production segments. This move highlighted the contrast between the two divisions, with fuel distribution forecasted to generate approximately $79 million in EBITDA in 2024. In contrast, RNG production is expected to have a negative impact, contributing around negative $12 million.
The added transparency in financial reporting is anticipated to enhance the market's understanding of Clean Energy Fuels' operations. The analyst noted the reasonable 9-12 month ramp-up period for RNG projects, suggesting that current industry forecasts might not have fully accounted for this timeframe, potentially leading to adjustments in 2024 estimates.
Finally, the analyst suggested that there could be potential for guidance to exceed expectations. This optimism is based on the possibility of improved Low Carbon Fuel Standard (LCFS) prices, which could surpass the company's conservative assumption in the low $60s.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.