Why Clean Energy Fuels Should Be Shorted

Clean Energy Fuels (CLNE) posted a blend of positive and negative result for the third quarter, 2015 showing the increase in gallons delivered by 17%, fuel sales growth by double-digit and also the revenue fall by 11% from the third quarter, 2014.

A weak performance

The revenue for the quarter scaled down by 11% to $92.2 million from $103.4 million for the third quarter, 2014, as a result of drop in product revenue to $77 million from $90 million for the third quarter, 2014. The revenue from services went up to $14.9 million from $12.9 million for the third quarter, 2014.
Further, construction revenue dropped by $410.3 million from the third quarter, 2014, driven by the upgrades made for existing customers in 2015, in the product mix favoring projects.

Despite the 40% fall in price of natural gas, from the same quarter, 2014, the fuel volume growth of Clean Energy Fuels led to an increase of 6.7% in fuel-volume revenue. Further, the Gallons delivered for the quarter went up to $80.6 million from $68.6 million for the third quarter, 2014, primarily driven by increase in gallons of compressed natural gas to $61.1 million from $47.6 million for the third quarter, 2014.

Moving ahead to the expenses, the product cost of sales dropped to $59 million from $79 million for the third quarter, 2014 and the service cost of sales increased to $7.4 million from $4.9 million for the same period, 2014. Further, the total operating expenses dropped to $108 million from $121 million for the third quarter, 2014. In addition, considering the adverse end-market situation faced by Clean Energy Fuels, the company did a great job by delivering positive EBITDA, backed by company’s cost-reduction methods.

Looking forward, Clean Energy Fuels posted operating loss of $15.7 million, which narrowed from operating loss of $17 million for the third quarter, 2014.  The company further posted net loss of $23.1 million, but the loss narrowed from net loss of $30.0 million for the third quarter, 2014. Clean Energy Fuels posted Diluted loss per share of $0.25 for the quarter, showing a drop from Diluted loss per share of $0.32 for the same quarter, 2014.

Increasing contracts

Clean Energy Fuels has opened a private fueling facility of CNG for fueling up 100 CNG buses, owned by Los Angeles. The company has also signed a maintenance agreement of four years with Union Gas Limited for supporting the station which is build for the Hamilton Street Railway.

Further, Clean Energy Fuels’ agreement with Frito-Lay has been renewed, for supporting 200 plus tractor fleet of CNG. Also, Matheson trucking will be fueling along with Clean Energy in Boise, by adding 17 trucks of CNG to their fleet.

The net cash outgo in Operating Activities dropped to $1.0 million for the ending nine-month period, 2015 from $56.4 million for the same period, last year. The company’s spending in Investing Activities went down to $32.6 million for the nine-month period, 2015 from $79.8 million for the same period, previous year. The company used net cash of $4.3 million in Financing Activities in the nine-month period, 2015 against the cash flow from financing activities of $10.6 million for the same period, 2014.

Valuation

Clean Energy Fuels has a negative PEG ratio of -0.14, as a result of negative earnings. The company has Price/Sales ratio of 0.89 and Enterprise Value/Revenue of 1.91. Further, the Current ratio dropped to 1.30 at the end of nine-month period, from 3.36 for the same period, last year. Debt/Equity ratio went up to 1.54 at the end of nine-month period, 2015 from 1.40 for the same period, 2014. Hence, Clean Energy Fuels has a number of negatives, which is why it should be avoided.
Published on Dec 15, 2015
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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