Koppers (KOP) Hits 52-Week High On Solid Growth Prospects

Shares of Koppers Holdings Inc. (NYSE:KOP) reached a new 52-week high of $27.87 on Jun 6, before closing the trading session slightly lower at $27.53. This apex improved upon the last 52-week high of $27.38 on Jun 12, 2015.

The chemical company currently yields a year-to-date return of 50.8%. The trading volume for the session was 0.21 million shares. Positive earnings estimate revisions for 2016 and 2017, along with an expected earnings growth rate of 10% for the next five years, indicate scope for further stock price appreciation.

Growth Drivers

Koppers Holdings’ financial results have been impressive in three out of four trailing quarters, with an average positive earnings surprise of 59.17%. Last quarter, the company’s earnings of 28 cents per share surpassed the Zacks Consensus Estimate of 8 cents by a whopping 250%. Quarterly results were supported by increased demand for the company’s Performance Chemicals products. Also, Koppers’ adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) grew 23.8% year over year. The company’s share price has grown roughly 6% since its first-quarter earnings release on May 6.

For 2016, Koppers Holdings expects favorable business environment in its Performance Chemicals segment. Adjusted earnings is anticipated to be within $1.85−$2.10 per share range, compared with its previous expectation of $1.80−$2.10. Revenue will be approximately $1.5 billion while adjusted EBITDA is likely to be $160−$168 million.

In addition, Koppers Holdings has agreed to sell its tar distillation properties and assets in the UK to Industrial Chemicals Group Limited. Subject to fulfillment of closing conditions, the transaction will be completed in second-quarter 2016. We believe that the disposition of the abovementioned assets will help the company streamline its Carbon Materials and Chemicals businesses.

Estimate Revisions Show Potency

Over the last 60 days, the Zacks Consensus Estimate for Koppers Holdings grew 2.2% to $1.90 for 2016 and 2.5% to $2.47 for 2017. These estimates represent year-over-year growth of 26.1% for 2016 and 29.6% for 2017%.

With a market capitalization of $568 million, Koppers Holdings currently carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the chemical industry include Albemarle Corporation (NYSE:ALB) , Axiall Corporation (NYSE:AXLL) and Innophos Holdings Inc (NASDAQ:IPHS) . All these stocks sport a Zacks Rank #1 (Strong Buy)