Q1 numbers should move PEIX into the $25-30 range. IF conditions from March were to last a whole Q2, PEIX could double Q1 profits but I don't expect that. We have ethanol at extremely elevated levels due to bad weather and rail car shortages. The weather will fade and so should the price of ethanol. The rail car shortages are a longer term problem. Pipelines takes years to approve and/or build. That's the real solution to the problem. Increased regulation is coming for better tanker cars so that won't help the situation. So which government agency will move faster? The ones that approve pipelines or the ones that approve safer tanker cars. The answer?
Neither. Both will take years of time to come to a conclusion. Wonder if Obama will accept the blame for the next few tanker car explosions because he's holding up the Keystone pipeline? Nah!
The big question is corn. How will this year's crop do? The farmers are planting 4% less acreage so unless the crop yield is high(lots of sun, just enough rain)prices will climb.
If we reach the end of Q2 and ethanol has remained elevated but corn has crept up, we should still have a great Q2. BUT if the Midwest is reporting drought conditions, PEIX will likely not benefit as much as they should. I want to see how much non cash expense they have in Q1 for early debt payoff and warrant valuations. Could lower eps substantially. The lower interest expense will be great over time but the non cash charges will hit the current qtr pretty hard. The huge price runup in the stock since January are going to provide some negative feedback into the P&L.
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