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Chemours (CC) Down 22% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Chemours (CC). Shares have lost about 22% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Chemours due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Chemours' Earnings and Revenues Miss Estimates in Q2  

Chemours logged profits of $96 million or 57 cents per share in the second quarter of 2019, down roughly 66% from a profit of $281 million or $1.53 a year ago. The results in the reported quarter include a $7 million charge associated with the company's Fayetteville facility.

Adjusted earnings were 72 cents per share for the quarter, which fell short of the Zacks Consensus Estimate of 90 cents.

Net sales fell around 22% year over year to $1,408 million, hurt by lower volumes in the company’s Titanium Technologies unit. The company saw weak demand for Ti-Pure TiO2 pigment. Revenues trailed the Zacks Consensus Estimate of $1,530 million.

Segment Highlights

Revenues in the Fluoroproducts segment fell 11% year over year to $ $711 million in the reported quarter, impacted by lower volumes. Higher demand for Opteon refrigerants was more than offset by Illegal imports of HFC refrigerants into the European Union and weaker demand for base refrigerants in North America.

Revenues in the Chemical Solutions unit were $130 million, down 15% year over year. Volumes fell due to lower sales in Performance Chemicals and Intermediates, and in Mining Solutions due to operational issues. The company saw higher prices in the quarter.
 
Revenues in the Titanium Technologies division were $567 million, down around 34% from the prior-year quarter. The decline is attributable to lower volumes of Ti-Pure TiO2.

Financials

Chemours ended the quarter with cash and cash equivalents of $630 million, down roughly 48% year over year. Long-term debt was $4,190 million, up around 6% year over year.
 
Chemours returned $108 million to shareholders through share buybacks and dividends in the quarter.

Outlook

Chemours lowered its earnings guidance for 2019 factoring in the weak second-quarter performance and increasing macro-economic uncertainties. It now expects adjusted EBITDA in the range of $1-$1.15 billion for 2019. The company also sees adjusted earnings of between $2.37 and $3.08 per share for the year.

Capital expenditures are forecast to be around $500 million for 2019. The company also expects free cash flow of around $100 million for the year.  
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -46.45% due to these changes.

VGM Scores

At this time, Chemours has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Chemours has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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