Green Plains ( NASDAQ: GPRE ) -5.7% in Monday's trading after BMO Capital downgraded the ethanol maker to Market Perform from Outperform with a $31 price target, slashed from $45, saying margin pressures may slow its transformation from a biofuels maker into a a high-protein corn ingredients maker.
"The near-term case for aggressively investing in GPRE is less persuasive, as the transition from GPRE 1.0 to GPRE 2.0 may extend longer than we initially expected," BMO analyst Kenneth Zaslow wrote.
Zaslow said his downgrade does not reflect a change in his long-term view that Green Plains' ( GPRE ) strategic actions such as Ultra Hi-Protein and Clean Sugar should structurally transform its EBITDA earnings power to more than $500M, but instead that a potential delay in achieving its targeted Ultra Hi-Protein margins, and a more challenging underlying ethanol margin outlook both short- and medium-term could pressure EBITDA below consensus.
Green Plains' ( GPRE ) Q2 earnings came in much better than expected as revenues topped $1B and a "historic" average production utilization rate hit 96.9% of capacity .
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Green Plains cut at BMO as lower ethanol margins may slow transformation