Koppers (KOP) Extends Railroad Contract With Favorable Terms
Koppers Holdings Inc. KOP has made significant strides in securing its financial future amid inflation and supply chain disruptions. The company has agreed to amend its contract with one of its Class I railroad customers, extending the current agreement term from 2026 to 2030. This extension comes with favorable pricing adjustments, marking a crucial development in Koppers' ongoing efforts to mitigate the impact of input cost inflation on its operations.
The amendment marks the fourth Class I railroad customer with which KOP has reached an agreement this year with higher pricing. These agreements reflect a proactive approach to addressing the challenges posed by inflation and supply chain disruptions on its rail business, which have been further exacerbated by the pandemic and global geopolitical events, including the war in Ukraine.
The latest amendment and extension represent a pivotal step toward restoring the company's profitability to an acceptable level, the company noted. The company has witnessed a significant decline in the profitability of its treated wood products over the past five years. The price adjustments in its existing agreements provide a much-needed boost to this segment of the business and acknowledge the importance of a healthy supplier base for the industry.
While these contract amendments are a positive development, the company noted that there is more work to be done in convincing others of the need to pay fair value for products like crossties, aligning with current market conditions.
Koppers’ strategic efforts to improve contract terms with Class I railroad customers amid challenging conditions reflect a commitment to long-term sustainability and profitability. These favorable adjustments provide a solid foundation for the company's continued success in the rail industry, offering benefits to both Koppers and its valued customers.
The company’s shares have rallied 70% in the past year compared with 3.8% growth of its industry.
Image Source: Zacks Investment Research
Koppers remains focused on expanding and optimizing its business and making progress toward its long-term financial goals. Its revenues climbed around 15% year over year in the second quarter, driven by record sales from the Railroad and Utility Products and Services (“RUPS”) and Performance Chemicals segments on higher pricing and volumes. The Carbon Materials and Chemicals segment also delivered higher sales on price increases.
Sales from the RUPS segment climbed around 15% year over year to $234.4 million in the second quarter. Sales were driven by higher prices in several markets and increased volumes for crossties and utility poles.
Koppers Holdings Inc. Price and Consensus
Koppers Holdings Inc. price-consensus-chart | Koppers Holdings Inc. Quote
Zacks Rank & Key Picks
Koppers currently has a Zacks Rank #4 (Sell).
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation CRS, Hawkins, Inc. HWKN and Akzo Nobel N.V. AKZOY.
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 85% in a year.
Hawkins currently carries a Zacks Rank #1. It has a projected earnings growth rate of 18.9% for the current year.
Hawkins has a trailing four-quarter earnings surprise of roughly 25.6%, on average. HWKN shares are up around 60% in a year.
Akzo Nobel currently carries a Zacks Rank #1. The Zacks Consensus Estimate for AKZOY's current-year earnings has been revised 2.9% upward over the past 60 days.
The Zacks Consensus Estimate for current fiscal-year earnings of Akzo Nobel is currently pegged at $1.44, implying year-over-year growth of 67.4%. AKZOY shares have gained around 25% in a year.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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
Carpenter Technology Corporation (CRS) : Free Stock Analysis Report
Koppers Holdings Inc. (KOP) : Free Stock Analysis Report
Akzo Nobel NV (AKZOY) : Free Stock Analysis Report
Hawkins, Inc. (HWKN) : Free Stock Analysis Report
