Here's Why You Should Invest in Koppers (KOP) Stock Now
Koppers Holdings Inc. KOP has experienced a 35.5% increase in its stock value year to date, driven by upbeat guidance and strong second-quarter performance.
The stock offers an attractive investment opportunity with strong growth prospects, as reflected in its Zacks Rank #2 (Buy).
Koppers Holdings Inc. Price and Consensus
Koppers Holdings Inc. price-consensus-chart | Koppers Holdings Inc. Quote
Positive Earnings Surprise History
Koppers has outperformed the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter average earnings surprise of 21.7%.
Healthy Growth Potential
The 2023 Zacks Consensus Estimate is pegged at $4.45, indicating a 7.5% increase compared with the previous year’s levels. Further, earnings are expected to experience a 6.3% growth in 2024.
Estimates Northbound
The Zacks Consensus Estimate for Koppers for 2023 has increased by around 1.1% in the past two months. The consensus estimate for 2024 has also been revised 3.7% upward over the same time frame.
An Outperformer
Shares of Koppers are up 70.3% over the past year compared with the industry’s rise of 3.7% in the same period.
Image Source: Zacks Investment Research
Attractive Valuation
Valuation looks attractive as KOP’s shares are currently trading lower than the industry average, suggesting that the stock still has upside potential.
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Koppers is currently trading at a trailing 12-month EV/EBITDA multiple of 6.69, cheaper compared with the industry average of 9.49.
What’s Going in Koppers’ Favor?
Last month, the company raised its EBITDA and adjusted EPS guidance. Adjusted EBITDA is anticipated to be within the range of $250 million to $260 million, up from the previous projection of $250 million and an increase from the $228.1 million reported in the prior year. Adjusted EPS is also expected to be in the range of $4.30-$4.60 per share, compared to the earlier estimate of $4.40, signifying growth from the prior year's $4.14 per share.
This positive outlook is supported by various factors, including strong demand for utility poles and wood preservatives in residential and industrial sectors, strategic pricing enhancements in the rail business, and the impressive resilience shown by the Carbon Materials and Chemicals segment in managing unforeseen market disruptions. These factors collectively instill confidence that adjusted EBITDA will exceed the $250 million milestone, aligning with the company's determined path toward its ambitious long-term objective of achieving $300 million in adjusted EBITDA by 2025, reaffirming its commitment to sustained success.
In the second quarter, the company reported adjusted earnings per share of $1.26, surpassing the Zacks Consensus Estimate of $1.08 and increasing from 97 cents in the prior year. Total revenues reached $577.2 million, up 15% year over year and exceeding the consensus estimate of $531 million. This exceptional performance was driven by record sales in the Railroad and Utility Products and Services and the Performance Chemicals segments, attributed to higher pricing and increased volumes. The Carbon Materials and Chemicals segment also contributed positively due to price increases.
Other Key Picks
Some other top-ranked stocks in the basic materials space are WestRock Company WRK, sporting a Zacks Rank #1 (Strong Buy), and Air Products and Chemicals, Inc. APD and Barrick Gold Corporation GOLD, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, the Zacks Consensus Estimate for Westrock’s current fiscal year has been revised upward by 5.2%. WRK beat the Zacks Consensus Estimate in three of the last four quarters while missing in one quarter, with the average earnings surprise being 30.7%. The company’s shares have rallied 16.1% in the past year.
The consensus estimate for Air Products’ current fiscal year earnings is pegged at $11.47, indicating year-over-year growth of 10.2%. APD beat the Zacks Consensus Estimate in three of the last four quarters while missing in one quarter, with the average earnings surprise being 1.8%. The company’s shares have surged 22.3% in the past year.
The consensus estimate for Barrick Gold’s current year earnings is pegged at 89 cents, indicating year-over-year growth of 18.7%. GOLD beat the Zacks Consensus Estimate in all of the last four quarters, with the average earnings surprise being 16.4%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Air Products and Chemicals, Inc. (APD) : Free Stock Analysis Report
Koppers Holdings Inc. (KOP) : Free Stock Analysis Report
Barrick Gold Corporation (GOLD) : Free Stock Analysis Report
WestRock Company (WRK) : Free Stock Analysis Report
