US BioEnergy reports increase profits for third quarter despite industry woes; cites cost-cutting, hedging efforts as keys

US BioEnergy (USBE) reported third quarter profits of $11.1 million in $148.9 million in revenues. Third quarter profits in 2006 were $8.3 million on revenues of $154.4 million. The company said that effective cost-controls and feedstock hedging allowed it to increase profits during a turbulent period for the industry. Wall Street analysts had expected earnings of $6 million in revenues of $155 million.

“US BioEnergy continues to show a highly-visible ramp-up in production that should provide sustained EPS growth through 2010,” said Raymond James analyst Pavel Molchanov. “While our stance on the entire ethanol space remains cautious, we believe the shares provide an attractive longer-term buying opportunity, representing arguably the deepest value play within the ethanol group (depicted further on page 2). We reiterate our Outperform rating. Our $11.00 target price is based on an 11x multiple to our updated 2008 EPS estimate, which we believe is conservative given our view that US BioEnergy can achieve three-year EPS growth of at least 20%.”
Earlier this year, the company acquired Millennium Ethanol. The Millenium acquisition brought the St. Paul-based US BioEnergy’s holdings to five ethanol plants, with an additional three under construction, including a new Millenium plant in South Dakota scheduled for opening next year.

US BioEnergy is a component stock in the Biofuels Digest Indexâ„¢.

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