Can 45Z Tax Credits Become Alto Ingredients' Next Earnings Driver?

ALTO's 45Z tax credits are contributing to earnings as it works to expand eligible production and lower carbon intensity.

Swati Prasad

2 min read

Alto Ingredients, Inc.’s ALTO 45Z tax credits are becoming a larger earnings contributor as it works to expand eligible production and lower carbon intensity. In the second quarter of 2026, Alto Ingredients generated $5.1 million in 45Z tax credit earnings, comprising $4 million of credits earned during the quarter and $1.1 million of final adjustments related to the sale of its 2025 credits. Year to date, it has accrued $7.9 million in net 2026 45Z credits that are expected to be monetized in the future.

For 2026, Alto Ingredients remains on track to qualify 90 million gallons or more of combined production for 45Z credits, supporting a minimum expectation of $15 million in income after monetization costs. Based on credits recognized through the first half, the company is currently tracking toward a $15-$16 million range.

The opportunity could expand through higher eligible volumes. Alto Ingredients completed a debottlenecking project at its Pekin dry mill that increased annual production capacity by about 8%, or 5 million gallons. The additional gallons are eligible for 45Z credits, with the full benefit of the added capacity expected in the fourth quarter.

Another opportunity is to lower the carbon intensity of corn sourced from farmer partners. Alto Ingredients is exploring how much corn and production volume could qualify under low-carbon-intensity corn. However, the company is not yet able to recognize this benefit for 2026. Practices such as cover crops implemented after the 2026 harvest could begin providing benefits in 2027.

ALTO's 45Z Tax Credit Developments Compare With Peers

Green Plains Inc. GPRE generated significant value from 45Z credits in the second quarter of 2026. Green Plains reported $58.7 million in 45Z production tax credits, net of discounts and other costs, contributing to adjusted EBITDA of $93.3 million. For the first half, Green Plains recognized $113.9 million in 45Z credits on a net basis, highlighting the potential impact of the tax credit on ethanol economics.

Gevo, Inc. GEVO is targeting more than $70 million in 45Z tax credit monetization in 2026, compared with $52 million last year. In its second-quarter 2026 earnings call, GEVO noted that the increase is supported by continued low-carbon ethanol and RNG production and improvements in carbon intensity. Gevo had already closed $20 million in 45Z credit sales after the second quarter, with the remaining approximately $50 million targeted for monetization by year-end.

ALTO Stock Price Performance, Valuation & Estimates

Shares of Alto Ingredients have fallen 8.4% over the three months against the industry’s growth of 18%.

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From a valuation standpoint, ALTO trades at a forward price-to-sales ratio of 0.33, lower than the industry’s average of 3.41.

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The Zacks Consensus Estimate for Alto Ingredients’ 2026 and 2027 earnings per share has declined 27.8% and 66.3% to 39 cents and 28 cents, respectively, in the past seven days.

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Alto Ingredients currently carries a Zacks Rank #4 (Sell).

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