It has been about a month since the last earnings report for Kronos Worldwide (KRO). Shares have added about 0.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kronos Worldwide due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Kronos Worldwide's Q2 Earnings Lag, Sales Top Estimates
Kronos Worldwide recorded profit of $29.5 million or 25 cents per share in second-quarter 2019, down from $77.7 million or 67 cents in the year-ago quarter. Earnings per share missed the Zacks Consensus Estimate of 34 cents.
Results in the reported quarter were affected by lower average selling prices as well as higher raw materials and other production costs, partly offset by increased sales volumes.
Net sales rose 3% year over year to $484.5 million as higher sales volumes offset lower average titanium dioxide (TiO2) selling prices. The top line beat the Zacks Consensus Estimate of $466.9 million.
Volumes and Pricing
Average TiO2 selling prices fell 8% year over year in the reported quarter. Average selling prices at the end of the quarter fell 2% year over year. Lower prices in European, Latin American and North American markets were partly offset by higher prices in the export market.
The company’s TiO2 sales volume rose 15% year over year on higher sales across all key markets. TiO2 production volumes in the second quarter were comparable on a year-over-year basis.
Profit in the TiO2 segment was $51.1 million in the reported quarter, down 58.9% from $124.2 million in the year-ago quarter. The decline reflects lower TiO2 selling prices and higher raw materials (stemming from third-party feedstock ore) as well as other production costs that more than offset higher sales volumes.
Kronos Worldwide ended the quarter with cash and cash equivalents of $328.6 million, down 23.9% year over year. Long-term debt was $452.2 million, down around 1.9% year over year.
Cash flow from operating activities was $26 million for the first half of 2019, down from $169.7 in the year-ago period.
Kronos Worldwide expects production volumes to be modestly higher year over year in 2019. The company envisions sales volumes for 2019 to be higher year over year based on expected production levels and assuming current global economic conditions to remain stable. The company will continue to examine current and expected customer demand levels in the near term as well as align production and inventories accordingly.
The company expects sales to be higher year over year in 2019, courtesy of higher expected sales volumes, partly offset by lower expected average selling prices.
Moreover, Kronos Worldwide expects its income from operations to be lower year over year in 2019 as benefits of higher expected sales volumes are expected to be more than offset by reduced expected average selling prices and increased raw material costs (especially feedstock ore).
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -29.69% due to these changes.
Currently, Kronos Worldwide has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Kronos Worldwide has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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