Compass Minerals (CMP) Earnings And Sales Lag Estimates In Q4

Compass Minerals International, Inc. (NYSE:CMP) logged a profit of $56.1 million or $1.63 per share in fourth-quarter 2019, up 10% from of a profit of $51 million or $1.50 a year ago. The bottom line was driven by earnings improvement in all operating segments. Earnings per share, however, trailed the Zacks Consensus Estimate of $1.88.

Revenues rose around 3% year over year to $500.3 million in the quarter. It missed the Zacks Consensus Estimate of $523.9 million. The company witnessed strong performance in its Salt segment in the quarter.

Full-Year Results

For 2019, earnings were $1.81 per share, down from $2.02 per share a year ago. The bottom line for 2019 was impacted by logistics cost associated with Mississippi River flooding and executive transitions costs.

Revenues were $1,490.5 million for the full year, essentially flat year over year. Higher sales in the Salt division were offset by weaker results across Plant Nutrition North America and Plant Nutrition South America segments.

Segment Highlights

Revenues at the Salt segment went up 9% year over year to $310.9 million in the reported quarter, aided by higher sales volumes and an increase in average selling prices. The company saw higher volumes in both highway deicing and consumer & industrial salt businesses in the quarter due to increased winter weather demand in North America. Operating earnings for the segment climbed 41% to $80.5 million.

Revenues at the Plant Nutrition North America segment declined 12% year over year to $76.5 million, impacted by lower sales volumes and average selling prices. Operating earnings for the unit rose 6% year over year to $14.8 million.

The Plant Nutrition South America segment recorded sales $110.3 million, down 3% year over year. Operating earnings went up 16% year over year to $18.5 million. The company benefited from increased chemical solutions sales volumes and a more profitable mix of agriculture product sales.

Financials

Compass Minerals ended 2019 with cash and cash equivalents of $34.7 million, up around 29% year over year. Long-term debt was $1,364.2 million, up 3% year over year.

The company recorded cash flow from operating activities of $159.6 million for 2019, down around 12% year over year. The decline is mainly due to increased inventory levels at the end of 2019 on a year over year basis.

Outlook

Moving ahead, Compass Minerals believes that its company-wide optimization efforts and the resilience of the North American sulfate of potash market have positioned it for further earnings growth in 2020.

The company envisions solid production performance at Goderich and Cote Blanche mines, healthy North American highway deicing prices and normalized agriculture fundamentals in both North and South America to deliver a significant year-over-year increase in EBITDA in 2020 to the range of $350-$400 million.

For the Salt segment, the company sees modest year-over-year growth in revenues for the first half of 2020. However, improved prices are forecast to drive an increase in EBITDA.

Moreover, Compass Minerals expects its Plant Nutrition North America business to return to more normalized sales volumes in 2020 with a gradual ramp-up in demand in the first half.

The company also expects the Plant Nutrition South America unit to deliver strong sales volume growth in 2020 on a year-over-year basis with sustained growth in its direct-to-grower agriculture sales and more normalized demand from its agriculture distribution customers.

Price Performance

Compass Minerals’ shares have gained 22.9% over a year, outperforming the industry's decline of 27.1%.

Zacks Rank & Key Picks

Compass Minerals currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space include Daqo New Energy Corp. (NYSE:DQ) , Agnico Eagle Mines Limited (NYSE:AEM) 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 93% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has estimated earnings growth rate of 90.6% for 2020 and carries a Zacks Rank #1. The company’s shares have shot up roughly 42% in a year’s time.

Pretium Resources has projected earnings growth rate of 105.3% for 2020 and carries a Zacks Rank #2 (Buy). The company’s shares have rallied around 29% over a year.

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