Lehman Brothers upgrades Aventine, VeraSun on favorable corn, ethanol prices

Lehman Brothers analyst Mansi Singh upgraded shares of ethanol producers Aventine Renewable Energy Holdings (AVR),  and VeraSun Energy (VSE) to “Overweight” from “Equal Weight”. Singh also upgraded the ethanol sector from “Neutral” to “Positive”.

In setting price targets of $20 for Aventine and $17 for VeraSun, Singh cited a combination of steady corn prices, rising ethanol prices, and the expectation of favorable energy legislation could result in a 50% increase in share value. Singh’s note to investors did not comment on the impact of higher oil prices, except to say that Lehman expected the margin between the price of gasoline and ethanol to narrow in coming months. Aventine presented last Friday at the Lehman Brothers CEO Energy/Power Conference.

Aventine, closing at $13.70 yesterday, had been trading at the low end of its $13.10 – $28.70 52-week range. VeraSun had also been trading at the bottom end of its range, with a closing price yesterday of $12.26 within a 52-week spread of $12.11 to $26.90.

VeraSun was up 6.2 percent to $13.00 in early trading, while Aventine was trading at $14.38, up 5 percent.

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