Axalta (AXTA) Earnings And Revenues Lag Estimates In Q4

Axalta Coating Systems Ltd. (NYSE:AXTA) logged earnings (as reported) of 18 cents per share for the fourth quarter of 2019, compared with earnings of 32 cents per share a year ago.

Barring one-time items, earnings were 42 cents per share for the quarter, missing the Zacks Consensus Estimate of 44 cents.

Revenues dropped around 6% year over year to $1,098.4 million in the quarter. The top line missed the Zacks Consensus Estimate of $1,112 million.

Unfavorable currency translation impact on sales was 1.3% while the sale of a consolidated joint venture interest had a 2% negative impact in the reported quarter. The company also saw weak volumes in both Performance Coatings and Transportation Coatings businesses.

Full-Year Results

For 2019, earnings were $1.06 per share, compared with 85 cents per share a year ago. Adjusted earnings were $1.80 per share for 2019, up around 6% year over year.

Revenues were $4,482.2 million for the full year, down around 5% year over year.

Segment Highlights

Revenues from the Performance Coatings division fell around 4% year over year to $729.7 million for the reported quarter. The company saw higher sales in its Refinish end-market, aided by price and mix benefits across all regions. Sales in the industrial end-market declined in the quarter. Industrial organic volumes fell due to weak demand, primarily in EMEA and the Americas, offset by improved average price and product mix.

Transportation Coatings unit recorded revenues of $368.7 million in the quarter, down around 9% year over year. Light vehicle sales fell due to lower sales across all regions. Commercial vehicle sales also declined in the quarter, impacted by lower production rates across all regions for trucks and specific non-truck product categories.

Financials

The company ended 2019 with cash and cash equivalents of $1,017.5 million, up around 47% year over year. Long-term debt at the end of the year was $3,790.2 million, down around 1% year over year.

The company generated cash from operating activities of $573.1 million for 2019, up around 16% year over year.

Outlook

The company noted that its major goals for this year include new business wins in key markets, execution to ongoing margin recovery and optimization of its financial returns through disciplined capital allocation and strong free cash flow generation. It also expects mixed demand across its end-markets in 2020.

Axalta expects adjusted earnings in the band of $1.85 -$2.00 per share for 2020. Net sales growth, excluding currency and mergers & acquisitions, is forecast to be 1%-2% for the year. The company also expects free cash flow of $450-$490 million for 2020.

Price Performance

Axalta’s shares are up 13% over a year, outperforming the 5.3% rise of the industry it belongs to.

Zacks Rank & Key Picks

Axalta currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space include Daqo New Energy Corp. (NYSE:DQ) , Royal Gold, Inc. (NASDAQ:RGLD) and Pretium Resources Inc. (TSX:PVG) .

Daqo New Energy has projected earnings growth rate of 326.3% for 2020 and sports a Zacks Rank #1 (Strong Buy). The company’s shares have rallied roughly 54% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Gold has estimated earnings growth rate of 83.5% for fiscal 2020 and carries a Zacks Rank #1. The company’s shares have shot up roughly 28% in a year’s time.

Pretium Resources has projected earnings growth rate of 106.9% for 2020 and carries a Zacks Rank #2 (Buy). The company’s shares have rallied around 36% over a year.

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