After reaching an important support level, Alto Ingredients, Inc. (ALTO) could be a good stock pick from a technical perspective. ALTO recently experienced a "golden cross" event, which saw its 50-day simple moving average breaking out above its 200-day simple moving average.Considered an important signifier for a bullish breakout, a golden cross is a technical chart pattern that's formed when a stock's short-term moving average breaks above a longer-term moving average; the most common crossover involves t ...

Group 1 - Alto Ingredients (ALTO) is part of the Consumer Discretionary group, which includes 265 companies and is currently ranked 9 in the Zacks Sector Rank [2] - The Zacks Rank system indicates that ALTO has a strong buy rating (1), with a 73% increase in the consensus earnings estimate for the full year over the past quarter, reflecting improved analyst sentiment [3] - Year-to-date, ALTO has gained approximately 3.9%, outperforming the average return of 2.7% for Consumer Discretionary companies [4] Group 2 - Alto Ingredients belongs to the Consumer Products - Discretionary industry, which consists of 26 companies and is currently ranked 178 in the Zacks Industry Rank; this industry has seen an average loss of 10.3% this year, indicating ALTO's relative strength [5] - In comparison, fuboTV Inc. (FUBO), another outperforming stock in the Consumer Discretionary sector, has increased by 212.7% year-to-date, with a 50% rise in its consensus EPS estimate over the past three months [4][5] - The Broadcast Radio and Television industry, to which fuboTV belongs, has performed well with a year-to-date increase of 26.8%, suggesting a favorable environment for both ALTO and FUBO [6]

Production Capacity and Sales - The company operates five alcohol production facilities with an annual production capacity of 350 million gallons, including up to 110 million gallons of specialty alcohols [77]. - In 2024, the company marketed and distributed approximately 386 million gallons of alcohols and over 1.4 million tons of essential ingredients [77]. - Alcohol sales from the Pekin Campus production segment increased by $2.8 million, or 3%, to $109.3 million for the three months ended September 30, 2025 [118]. - The total volume of production gallons sold from the Pekin Campus increased by 0.5 million gallons, or 1%, to 53.3 million gallons for the three months ended September 30, 2025 [118]. - Total renewable fuel gallons sold decreased by 10.1% to 66.8 million gallons for the three months ended September 30, 2025, compared to 74.3 million gallons in 2024 [113]. - The company experienced a 55.0% decline in renewable fuel gallons sold from Western production, dropping to 8.1 million gallons for the three months ended September 30, 2025 [113]. - Net sales of alcohol from the marketing and distribution segment increased by $4.1 million, or 8%, to $58.7 million for the three months ended September 30, 2025 [120]. - The volume of third-party alcohol sold increased by 1.9 million gallons, or 8%, to 27.1 million gallons for the three months ended September 30, 2025 [121]. - Net sales of alcohol from the Western production segment declined by $19.0 million, or 52%, to $17.4 million for the three months ended September 30, 2025 [122]. - The total volume of alcohol sold in the Western production segment decreased by 9.9 million gallons, or 55%, to 8.1 million gallons for the three months ended September 30, 2025 [122]. Financial Performance - Gross profit increased nearly $18 million and net income improved nearly $17 million in the third quarter compared to the same period in 2024 [92]. - Adjusted EBITDA grew by over $9 million in the third quarter, driven by higher-margin renewable fuel export sales and strong demand for liquid CO2 [92]. - For the three months ended September 30, 2025, the company reported a net income of $14,208,000 compared to a net loss of $(2,441,000) for the same period in 2024 [109]. - Adjusted EBITDA for the three months ended September 30, 2025, was $21,368,000, significantly up from $12,164,000 in 2024, reflecting a strong performance [109]. - Total net sales decreased by $10,828,000, or 4.3%, to $240,986,000 for the three months ended September 30, 2025, compared to $251,814,000 in 2024 [116]. - Gross profit for the three months ended September 30, 2025, was $23,494,000, representing a gross profit margin of 9.7%, compared to 2.4% in the same period of 2024 [116]. - Consolidated gross profit improved to $23.5 million for the three months ended September 30, 2025, from $6.0 million for the same period in 2024, representing a gross margin of 9.7% [125]. - The consolidated gross profit for the nine months ended September 30, 2025, increased to $19.8 million from $11.1 million for the same period in 2024, representing a gross margin of 2.9% [138]. - Net income attributable to common stockholders improved by $16.6 million for the three months ended September 30, 2025, reaching $13.9 million, and by $8.8 million for the nine months, resulting in a net loss of $9.4 million [146][147]. Operational Challenges and Developments - The dock at the Pekin Campus, damaged in April, resulted in $0.8 million in business interruption, and the company is working on repairs and a second dock to improve loadout capacity [104]. - The company is evaluating options for its cold-idled Magic Valley facility, including potential CO2 utilization and restarting operations [98]. - California Assembly Bill 30 could add over 600 million additional gallons per year for E15 fuel sales, creating significant demand for domestically produced ethanol [100]. Cash Flow and Financial Position - Cash generated from operations was $22.8 million for the three months ended September 30, 2025, and $3.7 million for the nine months, down from $6.3 million in the same period in 2024 [148][155]. - As of September 30, 2025, the company had $33.1 million in cash and cash equivalents, with $20.3 million available for borrowing under Kinergy's operating line of credit [148]. - Working capital improved to $108.5 million at September 30, 2025, from $95.3 million at December 31, 2024, due to a decrease of $15.4 million in current liabilities [150][152]. - The fixed-charge coverage ratio was 3.73 for the three months ended September 30, 2025, significantly exceeding the required ratio of 1.10 [160]. - The company used $12.2 million in cash for investing activities, including acquisitions and capital expenditures, during the nine months ended September 30, 2025 [156]. Market Risks - The company is exposed to market risks related to ethanol and corn pricing, which can fluctuate due to various factors including supply and demand dynamics [166][169]. - A sensitivity analysis estimated that a hypothetical 10% adverse change in ethanol prices could result in a decrease of approximately $20.8 million in pre-tax income, while a similar change in corn prices could lead to a decrease of approximately $18.6 million [173]. - The company managed a physical corn volume of 42.1 million bushels and ethanol volume of 199.0 million gallons as part of its risk management strategy [173]. - The company recognized net gains of $10.2 million and $9.0 million related to changes in the fair values of derivative contracts for the nine months ended September 30, 2025 and 2024, respectively [172]. Tax Credits and Future Expectations - The company expects to earn $0.10 per gallon in Section 45Z tax credits at its Columbia plant for 2025, with potential total credits of up to $18 million for 2025 and 2026 [95]. - The company has started the process to forward sell Section 45Z tax credits to monetize them for 2026 through 2029 [95]. - The company began exporting renewable fuel to Europe in Q4 2024, capturing more demand and locking in favorable premiums to domestic renewable fuel [99].

Core Insights - Alto Ingredients Inc. reported a significant turnaround in profitability for Q3 2025, with a net income of $13.9 million compared to a loss of $2.8 million in Q3 2024 [2] - The company's stock surged 38% in after-hours trading following the earnings release, reflecting positive market sentiment [1] Financial Performance - Q3 2025 metrics include: - Net Income: $13.9 million vs. -$2.8 million in Q3 2024 - Earnings Per Share (EPS): $0.19 vs. -$0.04 - Gross Profit: $23.5 million vs. $6.0 million - Adjusted EBITDA: $21.4 million vs. $12.2 million [2] - Cost of goods sold decreased from $245.9 million to $217.5 million, while net sales fell from $251.8 million to $241.0 million [3] Business Strategy - The CEO highlighted robust improvements across all business segments, driven by increased renewable fuel export sales and greater demand for liquid CO2, alongside successful cost reduction efforts [4] - The company is optimistic about generating Section 45Z tax credits on domestic renewable fuel sales and is exploring ways to reduce carbon intensity to enhance the value of these credits [4] Cash Position - As of September 30, the company reported cash and cash equivalents of $32.5 million, with borrowing availability of $85 million [5] Stock Performance - Year-to-date, the stock is down 31.36% but has gained 36.47% over the past six months, with a 52-week range of $0.76 to $2.00 and a market capitalization of $89.78 million [6]

Core Viewpoint - Alto Ingredients reported quarterly earnings of $0.19 per share, significantly exceeding the Zacks Consensus Estimate of a loss of $0.06 per share, marking an earnings surprise of +416.67% [1] - The company generated revenues of $240.99 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.91%, although this represents a decline from $251.81 million in the same quarter last year [2] Financial Performance - Over the last four quarters, Alto Ingredients has surpassed consensus EPS estimates two times and topped consensus revenue estimates four times [2] - The company's shares have declined approximately 27.6% since the beginning of the year, contrasting with the S&P 500's gain of 15.1% [3] Future Outlook - The sustainability of the stock's price movement will largely depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - Current consensus EPS estimate for the upcoming quarter is breakeven on revenues of $254.21 million, while for the current fiscal year, the estimate is -$0.37 on revenues of $933.35 million [7] Industry Context - The Consumer Products - Discretionary industry, to which Alto Ingredients belongs, is currently ranked in the bottom 30% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Alto Ingredients' performance [5][6]

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Financial Data and Key Metrics Changes - Gross profit increased by $18 million, net income improved by $17 million, and adjusted EBITDA grew by $9 million compared to Q3 2024 [5][17] - Net sales were $241 million, which is $11 million lower than the prior year, reflecting fewer gallons sold (89 million in Q3 2025 compared to 97 million in Q3 2024) [13][17] - Consolidated net income was $13.9 million or $0.19 per share for Q3 2025, improving by $16.6 million compared to Q3 2024 [17] Business Line Data and Key Metrics Changes - In the marketing and distribution segment, gross profit was $23.5 million, an increase of $17.5 million compared to the prior year [13] - Essential ingredients return improved to 53% from 43%, reflecting a strong rebound in corn oil pricing and a shift in production mix [14] - Alto Carbonic contributed nearly $2 million this quarter, bringing the Western production segment's gross profit to $1.5 million, up $3.8 million over Q3 2024 [15] Market Data and Key Metrics Changes - The fuel ethanol export market and related pricing were stronger than the domestic market, leading to increased production and sales in the export market [10] - The newly signed California Assembly Bill 30 authorizing E15 fuel sales year-round in California is expected to unlock significant demand for domestically produced ethanol, potentially adding over 600 million additional gallons per year [10][11] Company Strategy and Development Direction - The company aims to lower its carbon intensity score to capture more benefits from Section 45Z tax regulations and increase CO2 utilization at its facilities [6][20] - The strategy includes prioritizing shorter-term projects based on cost, timing, and projected ROI to pave the way for incremental profitability [5][19] - The company is considering options for other liquid CO2 facilities due to rising demand, particularly in Oregon and neighboring states [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to generate Section 45Z tax credits on ethanol production and highlighted the improved intrinsic value of facilities due to recent updates [8][20] - The company remains focused on improving operational efficiency and throughput while targeting growth in high-return market segments [19][20] - Management noted that the fundamentals around the Magic Valley facility have changed positively, allowing for a potential reassessment of its operations [33] Other Important Information - SG&A expenses improved by $1 million to $6.5 million due to right-sizing staffing levels and reduced costs related to the Eagle Alcohol acquisition [17] - The company generated $22.8 million in cash flow from operations during Q3 2025 [18] - The dock outage resulted in $800,000 in business interruption and additional logistical costs, with plans to build a second alcohol loadout dock to mitigate future interruptions [16] Q&A Session Summary Question: Initiatives to increase 45Z capture - Management is assessing low-investment options to improve 45Z capture but is reluctant to share specific details until more certainty is achieved [25][26] Question: Potential for Magic Valley to restart operations - Management is evaluating the highest and best use for the Magic Valley asset, considering the improved demand for CO2 and the potential for it to produce more than the Columbia plant [33][35] Question: Details on locked-in export sales - Management confirmed that they have locked in export volumes, which provides stability during seasonal lows in demand [38][41] Question: European exports and production limitations - The company is selling a combination of high-quality products and essential ingredients to Europe, with potential to pivot to selling more renewable fuel into that market [49][50] Question: Dock repair costs and insurance coverage - Management is working with their insurance carrier to determine coverage for the new dock and repairs to the original dock, with a focus on mitigating business interruption [58] Question: Future SG&A expectations - Management expects the benefits from cost-saving initiatives to continue, indicating that current SG&A levels are sustainable [61]

Financial Performance (Q3 2025 vs Q3 2024) - Net sales decreased from $2518 million to $2410 million[33] - Gross profit increased significantly from $60 million to $235 million[33] - Net income improved from a loss of $(28) million to a profit of $139 million[33] - Adjusted EBITDA increased from $122 million to $214 million[33] Liquidity and Capital Resources - Cash and cash equivalents decreased slightly from $355 million to $325 million[33] - Working capital increased from $953 million to $1085 million[33] - Long-term debt, net, increased from $929 million to $1006 million[33] - Borrowing availability was $850 million[33] Strategic Initiatives and Regulatory Landscape - The company is focusing on projects to lower carbon intensity to capture more benefits from Section 45Z tax credits[7] - There is policy momentum for E15, expanding market opportunity, with a potential 50% increase in annual U S ethanol demand if national year-round E15 adoption occurs[9, 14] - The company is applying for Section 45Z tax credits for Alto Columbia and Alto Pekin Dry Mill, estimated to total ~$18 million in the next two years[15]

Financial Performance - Gross profit for Q3 2025 was $23 million, an increase of $18 million compared to Q3 2024[1][2] - Net income for Q3 2025 was $14 million, improving by $17 million from a net loss of $2.8 million in Q3 2024, resulting in earnings of $0.19 per share[1][10] - Adjusted EBITDA for Q3 2025 was $21 million, growing by $9 million compared to Q3 2024[1][2] - Net income for the three months ended September 30, 2025, was $14.2 million, compared to a loss of $2.4 million in the same period of 2024[20] - Adjusted EBITDA for the nine months ended September 30, 2025, was $16.7 million, a significant improvement from a loss of $0.8 million in the same period of 2024[20] Sales and Revenue - Net sales for Q3 2025 were $241 million, down from $251.8 million in Q3 2024, representing a decrease of approximately 4.5%[4] - Total net sales reported for the three months ended September 30, 2025, were $240.99 million, down from $251.81 million in Q3 2024, reflecting a decrease of about 4.5%[24] - Total renewable fuel gallons sold decreased to 66.8 million gallons in Q3 2025 from 74.3 million gallons in Q3 2024, representing a decline of approximately 10.5%[21] Costs and Expenses - Cost of goods sold decreased to $217.5 million in Q3 2025 from $245.9 million in Q3 2024, a reduction of about 11.5%[4] - Selling, general and administrative expenses were reduced to $6.5 million in Q3 2025 from $7.5 million in Q3 2024, a decrease of approximately 13.3%[4] - The consolidated cost per bushel of corn was $4.55 in Q3 2025, down from $4.68 in Q3 2024, reflecting a decrease of about 2.8%[21] Market and Production - The average market price for ethanol per gallon rose to $1.84 in Q3 2025, compared to $1.81 in Q3 2024, indicating a slight increase[22] - Total essential ingredients sold decreased to 319.1 thousand tons in Q3 2025 from 391.4 thousand tons in Q3 2024, a decline of approximately 18.4%[22] - Gross profit for the Pekin Campus production segment increased to $18.92 million in Q3 2025 from $6.17 million in Q3 2024, showing a substantial improvement[24] Cash and Debt - Cash and cash equivalents at September 30, 2025, were $32.5 million, down from $35.5 million at December 31, 2024[6] - The company has $85 million in borrowing availability as of September 30, 2025, including $20 million under its operating line of credit[6] - Long-term debt increased to $100.6 million as of September 30, 2025, compared to $92.9 million as of December 31, 2024, representing an increase of approximately 8.3%[19] - The total stockholders' equity as of September 30, 2025, was $222.4 million, a slight decrease from $225.1 million as of December 31, 2024[19] Strategic Initiatives - The 2025 Carbonic acquisition is expected to enhance CO2 utilization to meet growing demand for premium liquid CO2[3] - The company is focused on generating Section 45Z tax credits on domestic renewable fuel sales and is exploring additional methods to lower carbon intensity[3]