TD Cowen analyst Jason Gabelman maintained a Hold rating on Vertex Energy (VTNR – Research Report) today and set a price target of $4.00.
Geoff Meacham has given his Hold rating due to a combination of factors relating to Vertex Energy’s performance. The 3rd quarter results for renewable diesel (RD) were negatively affected by the utilization of high-cost inventory which resulted in below-expected earnings. However, the 4th quarter is projected to show improved profitability, even though it is predicted to only break even. Additionally, the RD sector is anticipated to face challenges until 2024, which raises doubts about immediate RD asset monetization especially after Vertex Energy’s decision to hire an advisor.
On a positive note, the refining sector could potentially support cash flow until the RD industry sees improvement in margins. The conventional oil segment performed better than expected due to improved feedstock selection and unit optimization strategies. Despite unplanned downtime due to external factors, Vertex Energy managed to establish a marketing team to better place volumes and has implemented strategic gasoline hedges for the 4th quarter of 2023. These moves could potentially add approximately $3MM to the company’s earnings. However, the company’s move to engage an advisor to explore strategic transaction opportunities, possibly to secure funds for a significant debt due in 2025, adds another layer of uncertainty which likely influenced Geoff’s Hold rating.
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Vertex Energy (VTNR) Company Description:
Vertex Energy, Inc. engages in the recycle of industrial waste streams and off-specification commercial chemical products. It focuses on recycling used motor oil and other petroleum by-product streams. The company operates through the following business divisions: Black Oil, Refining & Marketing and Recovery. The Black Oil division engaged in operations across the entire used motor oil recycling value chain, including collection, aggregation, transportation, storage, refinement, and sales of aggregated feedstock and re-refined products to end users. The Refining & Marketing division engaged in the aggregation of feedstock, re-refining it into value end products, and selling these products to customers, as well as related transportation and storage activities. The Recovery division engages in the recovery and management of hydrocarbon streams. This division also provides industrial dismantling, demolition, decommissioning, investment recovery and marine salvage services in industrial facilities. The company was founded by Benjamin P. Cowart on May 14, 2008 and is headquartered in Houston, TX.
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