Here's Why You Should Retain Chemours (CC) in Your Portfolio
The Chemours Company CC is benefiting from continued adoption of its Opteon refrigerants, strong execution, higher pricing and cost-cutting measures. However, slow demand recovery may impact its performance.
The company’s shares are up 4.2% year to date, compared with 1.6% decline recorded by its industry.
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Higher Opteon Demand and Cost Actions Aid Chemours
Chemours, a Zacks Rank #3 (Hold) stock, is gaining from strong execution and its cost-reduction and pricing actions. Its Thermal & Specialized Solutions segment is benefiting from healthy demand in refrigerants. It is witnessing strong adoption of the Opteon platform. The company remains committed toward driving Opteon adoption. Higher prices are also contributing to the segment’s sales.
Chemours is also gaining from its efforts to reduce costs. Its cost-reduction program along with its productivity and operational improvement actions across its businesses are expected to support its margins in 2023. It is also taking appropriate pricing measures to counter cost inflation in raw materials.
The company also remains focused on boosting its cash flows and returning value to shareholders. It generated cash from operating activities of $754 million and free cash flow of $447 million in 2022. It also paid dividends worth $154 million and returned $495 million through share repurchases during the year. CC also repurchased $37 million of common stock and paid dividends worth $38 million in the second quarter of 2023. It expects to generate free cash flow of more than $325 million in 2023.
Demand Softness a Concern
In the Advanced Performance Materials segment, the company is seeing improved demand in the performance solutions portfolio. However, continued softness in advanced materials is likely to weigh on volumes in this segment. Demand is expected to remain weak in advanced materials for products that serve economically sensitive end markets. The company’s shift to higher value and differentiated products has also resulted in weaker demand in non-strategic end markets. Chemours sees weaker demand in advanced materials in second-half 2023.
While destocking in China and Europe has largely ended, the pace of demand recovery is expected to be modest over the near term, given the weak global economic recovery and continued macroeconomic uncertainties. This is likely to adversely impact volumes in the Titanium Technologies segment in the third quarter.
Chemours’ top line, in the second quarter, was hurt by lower sales in the Titanium Technologies segment and the advanced materials portfolio of the Advanced Performance Materials division.
The company updated its adjusted EBITDA guidance for 2023 factoring in weaker demand visibility in the second half of 2023. It now anticipates adjusted EBITDA for 2023 to be between $1.100 billion and $1.175 billion, down from its prior view of $1.20 billion and $1.30 billion.
The Chemours Company Price and Consensus
The Chemours Company price-consensus-chart | The Chemours Company Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation CRS, PPG Industries, Inc. PPG and Universal Stainless & Alloy Products, Inc. USAP.
The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.48, implying year-over-year growth of 205.3%. Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 56% in a year.
PPG Industries currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for PPG's current-year earnings has been revised 3.6% upward over the past 60 days.
PPG Industries’ earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 7.3%, on average. PPG shares have gained around 9% in a year.
Universal Stainless & Alloy Products currently carrying a Zacks Rank #2. It has a projected earnings growth rate of 160.8% for the current year.
Universal Stainless & Alloy Products has a trailing four-quarter earnings surprise of roughly 33.3%, on average. USAP shares are up around 66% in a year.
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PPG Industries, Inc. (PPG) : Free Stock Analysis Report
Carpenter Technology Corporation (CRS) : Free Stock Analysis Report
Universal Stainless & Alloy Products, Inc. (USAP) : Free Stock Analysis Report
The Chemours Company (CC) : Free Stock Analysis Report
