Is Western Production a Core Earnings and Growth Pillar for ALTO?

The Western production segment is an important pillar of Alto Ingredients’ ALTO growth story and a key driver of its earnings power, diversification and long-term strategic positioning. This segment includes the production and sale of renewable fuels and essential ingredients and, beginning in 2025, liquid CO2, in the Western U.S.

The Western production segment is strategically positioned to benefit from premium ethanol pricing, supported by regional supply constraints and close proximity to key end markets. In a mature and cyclical ethanol industry, this positioning allows Alto Ingredients to generate more resilient and higher-quality growth compared with Midwest-focused peers, while also supporting greater margin stability. In 2024, the Western production segment generated $115 million from alcohol sales and $37 million from essential ingredients. During the year, it sold roughly 61 million gallons of alcohol and 514,600 tons of essential ingredients on a dry matter basis. 

The segment’s exposure to California’s Low Carbon Fuel Standard (LCFS) further strengthens its growth profile by supporting demand for low-carbon ethanol. Alto’s Western facilities are well-positioned to serve LCFS-compliant markets due to shorter transportation distances and ongoing carbon-intensity reduction initiatives. The segment is less exposed to ethanol oversupply cycles and elevated transportation costs, resulting in more predictable segment-level EBITDA.

The Western production segment plays a central role in Alto’s long-term strategy, translating regulatory advantages and geographic positioning into sustainable pricing power, margin expansion and resilient earnings growth. It supports ALTO’s shift toward higher-value, lower-carbon products.

What About Its Peers?

Green Plains Inc. GPRE experiences uneven sales due to fluctuating ethanol prices, shifting fuel demand and commodity volatility. Green Plains is reshaping its business mix toward higher-margin protein and renewable ingredients, which have weighed on short-term sales but are expected to improve stability. Green Plains aims to reduce exposure to ethanol cyclicality through diversification.

Gevo, Inc. GEVO continues to generate modest sales as it advances renewable fuel and sustainable aviation fuel projects. Gevo’s revenues remain limited by development timelines and delayed offtake ramp-ups, reflecting its early-stage model. Nonetheless, Gevo expects sales growth as projects reach commercialization.

ALTO’s Price Performance

Alto Ingredients has gained 62.6% in a year, outperforming the industry.

ALTO’s Valuation

The stock is undervalued compared with its industry. It is currently trading at a price-to-earnings multiple of 16.38, lower than the industry average of 16.84.  

No Estimate Movement for ALTO

The consensus estimates for 2026 earnings witnessed no movement in the last 30 days.
 

The consensus estimates for ALTO’s 2026 revenues and earnings indicate year-over-year increases. ALTO stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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