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Koppers (KOP) Earnings Top Estimates in Q4, Revenues Lag

Anindya Barman

Koppers Holdings Inc. KOP logged a loss (attributable to the company) of $2.6 million or 13 cents per share for fourth-quarter 2018, narrower than a loss of $14.8 million or 71 cents a year ago.

Barring one-time items, earnings were 60 cents per share for the quarter, up from 40 cents a year ago. The results topped the Zacks Consensus Estimate of 45 cents.

Koppers recorded revenues of $425.4 million for the quarter, up around 16% year over year, driven by acquisitions. Sales, however, fell short of the Zacks Consensus Estimate of $432 million.

Koppers Holdings Inc. Price, Consensus and EPS Surprise

 

Koppers Holdings Inc. Price, Consensus and EPS Surprise | Koppers Holdings Inc. Quote

FY18 Results

For 2018, profit was $23.4 million or $1.10 per share, down roughly 20% from $29.1 million or $1.32 per share recorded in 2017. Adjusted earnings per share for the year were $3.50, down from $3.68 a year ago, reflecting higher interest expense and depreciation & amortization costs.  

Net sales for the year rose roughly 16% year over year to $1,710.2 million. Barring sales related to acquisitions, sales rose 5%.

Segment Highlights

Revenues from the Railroad and Utility Products and Services segment surged around 50% year over year to $164.2 million in the quarter. The growth was driven by acquisitions, favorable pricing trends for crossties and increased demand for railroad bridge services that more than offset reduced volumes related to utility products in Australia.

The Performance Chemicals unit recorded sales of $99.3 million in the quarter, up around 7% year over year. The increase was aided by a favorable product mix and improved demand in North America.     

Revenues from the Carbon Materials and Chemicals division fell around 1% to $161.9 million, impacted by unfavorable currency translation. Barring the currency impact, sales rose roughly 2%, aided by increased demand for carbon pitch in North America and Australia.

Financials

Koppers ended 2018 with cash and cash equivalents of $40.6 million, down around 33% year over year. Long-term debt was $978.8 million, up around 47% year over year.

Capital expenditures for 2018 were $109.7 million, up roughly 63% from $67.5 million a year ago.

Outlook

Moving ahead, Koppers expects sales of around $1.8-$1.9 billion for 2019, based on contributions from the acquisitions made last year and a stronger demand environment in the wood-based technology related businesses, especially Performance Chemicals.

Moreover, Koppers expects adjusted EBITDA to be around $210-$225 million for 2019, compared with roughly $222 million in 2018.

Koppers also expects adjusted earnings for 2019 to be in the range of $2.87 to $3.32 per share factoring in higher interest expenses and depreciation & amortization costs. Effective tax rate for 2019 is projected at around 30%.

As part of its strategic plan, the company is also taking actions to improve profitability by $10 million in 2019. Benefits of around $25-$40 million are also forecast to be realized over the next five years through network optimization, commercial development, and raw materials and other cost savings.

Zacks Rank & Stocks to Consider

Koppers currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, Israel Chemicals Ltd. ICL and Franco-Nevada Corporation FNV.

Kirkland Lake Gold has an expected earnings growth rate of 8.8% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have shot up around 125% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 10.8% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied around 27% over the past year.  

Franco-Nevada has an expected earnings growth rate of 11.2% for the current year and carries a Zacks Rank #2. Its shares have gained roughly 6% in the past year.

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