Investing.com -- Shares of German biofuel maker Verbio Vereinigte Bioenergie AG jumped over 10% on Friday after Jefferies upgraded the stock to "buy" from "hold," saying higher-than-expected biodiesel spreads should improve profitability.

Still guessing which stocks will beat the market? Our AI portfolio updates monthly and is outperforming the S&P 500 by 118%. See this month's list »

The brokerage raised its price target to €42 from €36, which it said is 57% above the stock's prior close of €26.82. It said the increase was driven by higher earnings forecasts.

Jefferies said Verbio's roughly €1 billion investment phase is largely behind it, so the focus now shifts to earning more from its existing plants.

It expects better cash flow and returns, with chemicals offering extra upside over the medium term.

Unsure what to buy ahead of earnings? Our AI's recent pre-earnings calls delivered gains of +77% to +118% after results dropped. See this month's earnings picks »

The brokerage also pointed to Germany's tightening greenhouse gas quota rules. The required reduction in greenhouse gas emissions from fuels rises from 12.0% in 2026 to 17.5% in 2027 and 26.5% by 2030.

Verbio management has said a €100-per-tonne move in quota prices is worth about €40 million to €80 million of earnings before interest, tax, depreciation and amortisation (EBITDA). Jefferies called Verbio one of the best-placed companies to benefit.

Jefferies expects the recent improvement in biodiesel spreads to drive a better-than-expected first half. It said Verbio's EBITDA guidance of €210 million to €250 million now looks conservative, even if spreads return to normal in the second half.

Jefferies raised its 2027 revenue forecast by 11% and its 2028 forecast by 9%. It raised its 2027 earnings per share estimate to €1.62 from €1.58, and its 2028 estimate by 33%. It models about €600 million of cumulative free cash flow from 2026 to 2029.

Verbio's ethenolysis plant, which turns biodiesel into specialty chemicals used in products such as lubricants and personal care goods, has started its first commercial expansion. Jefferies said initial supply agreements have been signed.

Jefferies' bull case sets a €50 target if quota prices reach €600 per tonne. Its bear case sets a €18 target if biofuel spreads fall and quota prices drop below €400 per tonne because of slower policy implementation in Europe.

Original Article

Verbio shares jump 10% as Jefferies sees biodiesel margins boosting earnings

Defense shares rally amid rising tensions in Ukraine

UK bank shares fall on report of potential tax hike in Oct. 28 budget