Trinseo's (TSE) Earnings And Revenues Lag Estimates In Q4

Trinseo S.A. (NYSE:TSE) logged a profit of $6 million or 14 cents per share in fourth-quarter 2019, compared with a loss of $1 million or 2 cents a year ago.

Barring one-time items, earnings were 35 cents a share, up from 23 cents per share a year ago. It, however, trailed the Zacks Consensus Estimate of 44 cents.

Revenues fell around 17% year over year to $888.8 million in the quarter, hurt by lower prices and reduced volumes in Feedstocks, Polystyrene and Synthetic Rubber segments. It also missed the Zacks Consensus Estimate of $933 million. The company continued to face challenging market conditions in the reported quarter.

Full-Year Results

For 2019, earnings were $2.26 per share, down from $6.70 per share a year ago. Adjusted earnings for the year were $3.13 per share, down from $7.25 a year ago.

Revenues were $3,776 million for the full year, down around 18% year over year, impacted by the pass through of lower raw material costs.

Segment Highlights

Revenues at the Latex Binders segment dropped 14% year over year to $219 million in the reported quarter due to the pass through of lower raw material costs.

Revenues at the Synthetic Rubber segment declined 23% year over year to $100 million, impacted by the pass through of lower raw material costs.

The Performance Plastics segment recorded sales $325 million, down 10% year over year due to reduced prices from the pass through of lower raw material costs and a weak polycarbonate market.

Sales at the Polystyrene segment were down 26% year over year to $176 million, affected by reduced sales volumes in Europe and the pass through of lower styrene cost.

Feedstocks segment sales dropped 13% year over year to $69 million due to the pass through of reduced market styrene prices.

Financials

Trinseo ended 2019 with cash and cash equivalents of $456.2 million, up around 1% year over year. Long-term debt was $1,162.6 million, modestly up year over year.

The company recorded cash flow from operating activities of $48 million for the reported quarter. The same for 2019 was $322 million. Free cash flow was $9 million for the fourth quarter and $212 million for 2019.

Trinseo also bought back roughly 0.5 million shares in the reported quarter for around $21 million.

Outlook

For 2020, Trinseo sees net income in the range of $95-$112 million. Adjusted EBITDA is forecast in the band of $325-$350 million. The company also expects adjusted earnings of $2.40-$2.84 per share for 2020.

The guidance includes an estimated impact of $5-$10 million (pre-tax) from reduced customer demand in China in the first quarter of 2020 associated with the outbreak of coronavirus.

Price Performance

Trinseo’s shares have lost 36.9% over a year, underperforming the industry's decline of 19.8%.

Zacks Rank & Key Picks

Trinseo currently carries a Zacks Rank #5 (Strong 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 93% 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 35% over a year.

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