On Wednesday, Scotiabank adjusted its forecast for Clean Energy Fuels Corp (NASDAQ:), lowering its price target to $6.00 from the previous $7.00. Despite the decline, the company maintained its outperform market rating.
The analyst believes that the fourth quarter 2023 results will not have a significant impact on the share price in the short term. The company’s adjusted EBITDA exceeded consensus expectations, partly due to insurance proceeds from the LNG plant incident, a factor that may not be fully appreciated by the market.
In its recent earnings report, Clean Energy Fuels (TSX:) provided a new level of detail by breaking down adjusted EBITDA for its fuel distribution and RNG (renewable energy) generation segments. The move highlighted the contrast between the two divisions, with fuel distribution projected to generate approximately $79 million in EBITDA in 2024. In contrast, RNG production is expected to have a negative impact, contributing approximately $12 million.
Additional financial reporting transparency is expected to improve market understanding of Clean Energy Fuels’ operations. The analyst noted a reasonable ramp-up period for RNG projects of 9-12 months, suggesting that current industry forecasts may not fully account for this period, potentially leading to adjustments to 2024 estimates.
Finally, the analyst suggested that the forecast could exceed expectations. This optimism is based on the possibility of higher Low Carbon Fuel Standard (LCFS) prices, which could exceed the company’s conservative low-$60 assumption.
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