24/7 Wall St.: The Burning Man Visits Ethanol (PEIX, AVR, VSE)
Ethanol stocks have been getting pounded since their IPOs and the sector has lost its luster. Pacific Ethanol Inc. (NASDAQ:PEIX) was the exception for a while as it has Bill Gates as an investor ahead of the great ethanol boom. But share prices for Aventine Renewable Energy Holdings (NYSE:AVR) and VeraSun Energy Corp. (NYSE:VSE) have fallen so far from their IPO prices that if you looked at a chart without a time period attached you might assume you were looking at any dot-com flame-out from 2000 to 2002. The bloom was off the rose from the beginning.
Recent rumors put VeraSun as potentially being toast, and yesterday's earnings release from Aventine will do nothing but contribute to that endless slide. Aventine reported EPS of $0.06 against analysts' expectations of $0.12, and revenue of $599.5 million against estimates of $716.37 million. Excluding non-cash gains of $18.4 million, the company managed only to break even.
Aventine also noted that it will delay the opening of its Aurora West plant in Nebraska by three months and is considering delaying construction of another new plant. About two-thirds of Aventine's cash, $60 million, resulted from tapping its revolving credit line.
Six weeks ago VeraSun was trading around $5.00/share. Then it announced that it was expecting to report a loss in the third quarter. The stock promptly dropped from $5.22 to $1.41, and it closed yesterday at $0.44/share. Pacific Ethanol is equally awful, falling from a 52-week high of $9.88 to close at just $0.86 yesterday.
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As you will see the chart from BigCharts.com over the last two years, these stocks would have been the best way to burn money that you could come up with.
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