GEVO Lands a Big Client But Isn’t a Buy Yet

Stock Market

Gevo (NASDAQ:GEVO) announced plans to help Delta Airlines (NYSE:DAL) cut its carbon emissions by supplying Delta with its sustainable aviation fuel. That could be great for the environment, but it probably doesn’t make GEVO stock a buy yet.

GEVO produces liquid carbons that are made into gasoline, jet fuel, and diesel fuel, and when these fuels are used, they have the potential to throw off net-zero greenhouse gas emissions. For its raw materials, the company uses renewable carbohydrates, which are low carbon and renewable.

This is important because the planet is getting warmer from greenhouse gasses trapping heat and warming the planet. According to the Environmental Protection Agency, “The largest source of greenhouse gas emissions from human activities in the United States is from burning fossil fuels for electricity, heat, and transportation.”

The EPA also states that almost all of the increases in greenhouse gas emissions have been a result of human activities.

GEVO will probably report earnings in early May. TipRanks.com has a consensus forecast for Q1 2022 at -08 cents vs. last year’s -05 cents for the same quarter. This year’s EPS is expected to be -27 cents, and 2023 EPS is forecast to be -29 cents.

On the other side, as reported by Brianna Kelly in the Minneapolis/St. Paul Business Journal on April 26, Delta has a mission to meaningfully reduce its emissions of carbon, and Delta is “betting that sustainable aviation fuel, made from plants or waste products, will help reduce its use on conventional petroleum products.” Estimates are that the usage of “clean” fuel can cut airplane emissions up to 80%.

Beginning in 2026, Delta will buy 75 million gallons of sustainable aviation fuel from GEVO annually for seven years.

These are positive news for Gevo. However, earnings are still negative (and growing the wrong way), and since it could take some time for these developments to help the company’s bottom line, I don’t believe it makes GEVO stock a buy yet. Not until its earnings reflect its promise.

On the date of publication, Max Isaacman did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Max Isaacman is an Investment Advisor Representative in San Francisco. He was a Merrill Lynch Representative and a Vice President of Lehman Brothers. His investment books were published by McGraw-Hill and Financial Times Press, including the first book on ETFs, How to be an Index Investor (McGraw-Hill, 2000). He wrote for the Emmy award-winning Website Minyanville.com. His email is exch13@aol.com.

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