Analyst Downgrades Vertex Energy: Exploring The Uncertain Forecast And Commodity Environment

Oppenheimer analyst Noah Kaye downgrades Vertex Energy, Inc VTNR to Perform from Outperform.

VTNR recently provided an operational update for 2Q, indicating lower crack spread capture and modestly higher opex vs. prior guidance.

Although RD production initially reached targeted capacity, go-forward production levels appear unclear as margins on RBD soybean oil have compressed materially, the analyst notes.

While VTNR has shown the ability to adapt to challenging market and operating conditions, Kaye is particularly looking for better clarity around RD economics and feedstock diversification, conventional refining strategy, cash generation profile, and capital allocation. 

The analyst lowered FY23-24 revenue estimates to reflect the current commodity environment and VTNR's operational update. 

Kaye reduced FY23 sales/EPS estimates to $2.7 billion/$0.80, from $2.8 billion/ $1.41. 

For FY24, the analyst lowered sales/EPS estimates to $3.3 billion/$0.49 from $3.8 billion/$0.99.

While the analyst believes that Vertex is demonstrating improved operational discipline and adding value to the business via process improvements and portfolio optimization, Kaye remains attentive to spreading compression and execution risks in a challenging commodities environment.

Price Action: VTNR shares are trading higher by 1.8% to $5.07 on the last check Wednesday.