Koppers (KOP) Q4 Earnings Meet, Revenues Trail Estimates

Koppers Holdings Inc. (NYSE:KOP) swung to a profit (attributable to the company) of $20.6 million or 96 cents per share for fourth-quarter 2019, from a loss of $2.6 million or 13 cents a year ago. The bottom line in the reported quarter was boosted by a one-time deferred tax benefit of $14.9 million.

Barring one-time items, earnings were 29 cents per share for the quarter, down from 60 cents a year ago. It was in line with the Zacks Consensus Estimate. Higher profitability from the company's wood-preservation businesses was more than offset by weaker demand for carbon-related products.

Koppers recorded revenues of $393.2 million for the quarter, down around 8% year over year. Sales fell short of the Zacks Consensus Estimate of $393.5 million.

Segment Highlights

Revenues from the Railroad and Utility Products and Services segment went up around 3% year over year to $169.5 million in the quarter. The growth was supported by higher crosstie volumes and favorable pricing associated with Class I and commercial markets that more than offset reduced demand in maintenance-of-way and crosstie recovery businesses.

The Performance Chemicals unit recorded sales of $104.6 million in the quarter, up around 5% year over year. Sales were driven by increased organic volumes and favorable pricing for copper-based preservatives in North America as well as sales from new customers and new products.

Revenues from the Carbon Materials and Chemicals division fell around 26% to $119.1 million. Sales were impacted by reduced volumes for carbon pitch in China, Australia and Europe, and lower pricing for carbon pitch and refined chemicals, mainly in Europe and North America

Full-Year Results

Earnings (as reported) for 2019 were $3.16 per share, up from $1.10 per share a year ago. Adjusted earnings were $3.31 per share, down from $3.50 in 2018.

Revenues were $1,772.8 million for the full year, up around 4% year over year.

Financials

Koppers ended 2019 with cash and cash equivalents of $33 million, down around 19% year over year. Long-term debt was $891 million, down around 9% year over year.

Outlook

Moving ahead, Koppers currently sees no material negative impact from the coronavirus outbreak.

The company expects sales of around $1.7 billion for 2020, excluding any sales generated from Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”).

Koppers recently agreed to sell KJCC to Fangda Carbon New Material Co., Ltd. and C-Chem Co., Ltd, a subsidiary of Nippon Steel Chemical & Material Co., Ltd. The total sale price for the transaction is $107 million. After applicable adjustments, Koppers expects to realize around $65 million of net cash, after noncontrolling interest, taxes and expenses.

Moreover, Koppers expects adjusted EBITDA to be in the band of $200-$210 million for 2020, barring the contribution from KJCC.

Koppers also expects adjusted earnings for 2020 in the range of $3.00-$3.30 per share.

Price Performance

Koppers’ shares are down 16.4% over a year, compared with the 38.5% decline recorded by its industry.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the basic materials space include Daqo New Energy Corp. (NYSE:DQ) , NovaGold Resources Inc. (NYSE:NG) and Commercial Metals Company (NYSE:CMC) .

Daqo New Energy has projected earnings growth rate of 353.7% for 2020 and sports a Zacks Rank #1 (Strong Buy). The company’s shares have rallied roughly 70% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

NovaGold has projected earnings growth rate of 11.1% for the current fiscal and carries a Zacks Rank #2 (Buy). The company’s shares have surged around 103% over a year.

Commercial Metals has estimated earnings growth rate of 21.6% for the current fiscal and carries a Zacks Rank #2. The company’s shares are up roughly 8% in a year’s time.

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