Piper Jaffray Initiates Coverage On Green Plains Renewable Energy (GPRE): "Significant Earnings Growth Over Next 2 Years"

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08:10:57 am on March 16, 2010

Piper Jaffray has initiated coverage on Green Plains Renewable Energy (GPRE) this morning with an Overweight rating and a price target of $19. Hat tip to Street Insider for the following analyst comment:

“We believe this vertically-integrated ethanol producer is poised to deliver significant earnings growth over the next two years through much-improved ethanol production margins and the potential for highly-accretive M&A activity. The company’s recent capital raise strengthens the balance sheet and positions GPRE to pursue internal expansion plans and acquisitions across business verticals (most notably ethanol facilities)…Favorable supply & demand dynamics have led to a resurgence in ethanol production margins since early 2009…We estimate that ethanol acquisitions (for a standard 110 million gallon facility) would add $0.30-$0.40 in EPS and $27-$33 million in EBITDA in year 1, assuming the purchase price is ~$1.00/gal of production…From a regulatory standpoint, the increase in the RFS mandate in 2010 and the potential for the EPA to lift the ethanol blendwall later this year present positive macro catalysts for the stock.”

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