Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors, and Solazyme is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
Alternative fuels have been all the rage in recent years, and Solazyme seeks to produce sustainable biofuel and premium oils with its innovative algae-based technology. But some question whether the company can live up to the hype. Let's take an early look at what's been happening with Solazyme over the past quarter and what we're likely to see in its quarterly report on Wednesday.
Stats on Solazyme
Analyst EPS Estimate
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Will Solazyme get more energetic this quarter?
Analysts haven't changed their views on Solazyme much in the past three months, keeping current-quarter estimates steady. Yet even with losses as far out as analysts care to project, the stock has performed well recently, climbing almost 14% since mid-November.
The big news for Solazyme this quarter came back in November, when the company announced two major partnerships. On the alternative-energy front, Solazyme signed a joint venture agreement with Bunge , Solazyme could boost annual production to between 300,000 and 400,000 metric tons by 2016. Morever, Archer Daniels Midland signed up to collaborate with Solazyme on producing algal oils for the consumer market.
But at this point, it's far too early to be confident in Solazyme's long-term prospects. With minuscule sales, Solazyme is counting on a fast ramp-up in growth to justify its share price, but capacity expansion won't come online for several years. In that time, changing market conditions could sap much of the potential from the industry. Moreover, if competitor Amyris finds success from its sugar-based jet fuel, or if Rentech succeeds with its biomass projects, Solazyme could find its algae-based model falling out of favor.
In its report, Solazyme needs to establish not just promising prospects but a firm path to growth. As long as it can't put bottom-line profits where its mouth is, Solazyme will probably continue to struggle.
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The article Solazyme Earnings: An Early Look originally appeared on Fool.com.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.