Koppers (KOP) Earnings Surpass Estimates In Q3, Revenues Lag

Koppers Holdings Inc. (NYSE:KOP) posted a profit (attributable to the company) of $19.8 million or 94 cents per share for third-quarter 2019, up from $7.6 million or 35 cents a year ago.

Barring one-time items, earnings were $1.24 per share for the quarter, up from 73 cents a year ago. It topped the Zacks Consensus Estimate of 98 cents. The results were driven by the company's wood-preservation businesses and lower income taxes.

Koppers recorded revenues of $474.9 million for the quarter, up around 7% year over year, driven by sustained demand for wood-preservation products and services across several end markets. Sales, however, fell short of the Zacks Consensus Estimate of $485 million.

Segment Highlights

Revenues from the Railroad and Utility Products and Services segment went up around 8% year over year to $198.8 million in the quarter. The growth was supported by higher volumes and pricing associated with Class I customers, favorable pricing in the commercial crosstie market as well as higher demand in the domestic utility pole business.

The Performance Chemicals unit recorded sales of $123.9 million in the quarter, up around 15% year over year. Sales were driven by increased volumes of copper-based preservatives in North America, a favorable pricing mix and new product sales.

Revenues from the Carbon Materials and Chemicals division rose around 2% to $152.2 million, aided by higher sales volumes in China, partly masked by lower sales prices across China and Europe, lower carbon pitch volumes in Europe and Australia and reduced phthalic anhydride volumes in North America.

Financials

Koppers ended the quarter with cash and cash equivalents of $40.7 million, down around 35% year over year. Long-term debt was $948.8 million, down around 8% year over year.

Outlook

Koppers backed its sales guidance of around $1.8 billion for 2019, based on contributions from the acquisitions made last year and a strong demand environment in the wood-based technology related businesses.

Moreover, Koppers expects adjusted EBITDA to be in the band of $215-$220 million for 2019, compared with roughly $220 million in 2018.

Koppers also expects adjusted earnings for 2019 to be in the range of $3.35-$3.55 per share factoring in higher expected year-over-year interest expenses and depreciation and amortization costs. The effective tax rate for 2019 is projected at around 25%.

Price Performance

Koppers’ shares have shot up around 149% year to date, outperforming the roughly 14.6% decline recorded by its industry.

Zacks Rank & Stocks to Consider

Koppers currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth a look in the basic materials space include Agnico Eagle Mines Limited (NYSE:AEM) , Kirkland Lake Gold Ltd. (TSX:KL) and Franco-Nevada Corporation (TSX:FNV) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 168.6% for the current year. The company’s shares have rallied 72% in a year’s time.

Kirkland Lake Gold has projected earnings growth rate of 96.3% for the current year. The company’s shares have surged around 148% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 39.3% for the current year. The company’s shares have shot up roughly 51% in a year’s time.

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