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Quaker Chemical (KWR) Stock Rallies on Q3 Earnings & Sales Beat

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Quaker Chemical Corporation’s KWR shares rose after the company came up with its third-quarter 2020 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate.

The Pennsylvania-based company saw a strong rebound in its business on a sequential comparison basis in the third quarter on the back of an improvement in its end markets. Its shares rose 3.5% last Friday on the better-than-expected results and have also surged roughly 16.5% since then.

Earnings and Revenues Discussion

The company swung to a profit of $27.3 million or $1.53 per share in the third quarter from a loss of $13.1 million or 80 cents a year ago. The bottom line in the year-ago quarter was hit by restructuring charges, initial inventory fair value adjustments and costs related to closing of the company's combination with Houghton International, Inc.

Barring one-time items, earnings came in at $1.56 per share for the reported quarter. It surpassed the Zacks Consensus Estimate of 88 cents.

Net sales went up 13% year over year to $367.2 million in the quarter. It also topped the Zacks Consensus Estimate of $331.9 million. Revenues were driven by additional sales associated with the combination with Houghton and the acquisition of the operating divisions of Norman Hay plc.

 

Quaker Chemical Corporation Price, Consensus and EPS Surprise

 

Quaker Chemical Corporation Price, Consensus and EPS Surprise
Quaker Chemical Corporation Price, Consensus and EPS Surprise

Quaker Chemical Corporation price-consensus-eps-surprise-chart | Quaker Chemical Corporation Quote

 

Margins

The company’s gross profit in the reported quarter climbed around 34% year over year on the back of gross profit related to Houghton and Norman Hay. Gross margin for the quarter was 38.2%, up from 32.3% a year ago.

Adjusted EBITDA was $63.9 million for the reported quarter, up 5% from the prior-year quarter.

Financials

The company ended the quarter with cash and cash equivalents of $155.8 million, up nearly 22% year over year. Long-term debt was $846 million, up around 2% year over year.

Net operating cash flow for the reported quarter was $67.3 million. For the first nine months of 2020, net operating cash flow was $112 million, up from $35.5 million for the same period a year ago.

Outlook

The company sees gradual sequential improvement in its end markets as it progresses through the next two years.  It expects adjusted EBITDA for the fourth quarter to be in the range of the third-quarter level. It now expects full-year 2020 adjusted EBITDA to be more than $215 million.  

Quaker Chemical also expects its additional cost-savings actions, integration synergies, improvement in product margins and good cash flows to continue to help it amid the current challenging environment.

Zacks Rank & Key Picks

Quaker Chemical currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited AEM, Barrick Gold Corporation GOLD and B2Gold Corp. BTG.

Agnico Eagle has a projected earnings growth rate of 103.1% for the current year. The company’s shares have gained around 27% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold has an expected earnings growth rate of 111.8% for the current year. The company’s shares have surged around 58% in the past year. It currently carries a Zacks Rank #2 (Buy).

B2Gold has a projected earnings growth rate of 257.1% for the current year. The company’s shares have shot up roughly 77% in a year. It currently carries a Zacks Rank #2.

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