U.S. Silica Holdings, Inc. SLCA purchased a former ceramic proppant facility located in Millen, GA. The facility will be converted in order to manufacture high-end products for the company's Industrial and Specialties Products (“ISP”) business.
The acquisition will allow the company to expand its capacity to meet increasing customer demand for ISP’s new profitable and most successful products. The buyout allows U.S. Silica to improve its product quality and accelerate product launches, as well as facilitate customizations of product, to meet the requirements of industrial customers.
The company’s ISP business has a strong pipeline of new, high-margin and high-performance products in various stages. These new products are expected to drive profitability for the ISP business in the near future. Over the last five years, profitability of the company’s ISP business increased at a 10% compound annual growth rate (CAGR).
The company is in the initial stage of customer trials and is looking to start production at the plant in the second half of 2019.
U.S. Silica’s shares have lost 53.3% in the past six months compared with the industry’s 4.9% decline.
In October 2018, U.S. Silica stated that it envisions a seasonal slowdown in ISP volume and seasonal decline in higher margin ground product sales in the fourth quarter as customers idle production facility for major maintenance and holidays.
U.S. Silica is likely to gain from expansion actions in the Permian Basin. The Sandbox buyout is expected to make a significant contribution. U.S. Silica is also focusing on preserving capital and reducing costs.
U.S. Silica Holdings, Inc. Price and Consensus
U.S. Silica Holdings, Inc. Price and Consensus | U.S. Silica Holdings, Inc. Quote
Zacks Rank & Stocks to Consider
U.S Silica currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the basic materials space are Ingevity Corporation NGVT, CF Industries Holdings, Inc. CF and Cameco Corporation CCJ.
Ingevity’s shares have gained 14.5% in the past year. The company has an expected earnings growth rate of 21.5% for 2019 and it currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CF Industries has an expected earnings growth rate of 70.5% for 2019 and a Zacks Rank #2 (Buy). The stock has gained 3% in a year.
Cameco has an expected earnings growth rate of 20% for 2019 and a Zacks Rank #2. Its shares have gained 24.6% in a year’s time.
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