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Why Is Kronos Worldwide (KRO) Up 0.1% Since Last Earnings Report?

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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 and Sales Trail Estimates

Kronos Worldwide recorded profit of $25.7 million or 22 cents per share in second-quarter 2021, up from $18.6 million or 16 cents in the year-ago quarter. The figure however, missed the Zacks Consensus Estimate of 26 cents per share.

The increase in the bottom line in the reported quarter was due to higher income from operations led by rise in sales volumes and higher average TiO2 selling prices, partly offset by increase in manufacturing and other production costs.
 
Net sales rose 24% year over year to $478.6 million from $386 million, driven by higher sales volumes and higher average TiO2 selling prices. The top line, however, missed the Zacks Consensus Estimate of $483.4 million.

Volumes and Pricing

The company’s TiO2 sales volumes went up 16% year over year in the reported quarter due to strong demand in all major markets on the back the ongoing global recovery. TiO2 production volumes were up 2% due to adjustments done in 2020 to reduce production levels as a result of the pandemic.

Profit in the segment increased in the reported quarter on the back of higher sales volumes and rise in average TiO2 selling prices, which were partly offset by increased manufacturing and other production costs, including higher costs for raw materials and energy.

Average TiO2 selling prices climbed 3% year over year in the quarter.

Financials

Kronos Worldwide ended the second quarter with cash and cash equivalents of $363.8 million, increasing 6.6% year over year. Long-term debt was $472.5 million, marking a 6.2% rise.

Net cash provided by operating activities was $78.1 million in the six months ended Jun 30, 2021.

Outlook

Kronos expects global demand for consumer products to remain strong through 2021, positively impacting sales and production volumes, despite certain disruptions in global supply-chains and raw materials constraints and delays in transportation and logistics that are expected to continue in the near future. The company also expects TiO2 selling prices to rise through 2021 on higher consumer demand.

The company expects its sales and income from operations for 2021 to be higher on a year-over-year basis, mainly due to rise in TiO2 selling prices and sales volumes. However, its margins are expected to be affected by persistent cost increases.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -14.29% due to these changes.

VGM Scores

At this time, Kronos Worldwide has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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 #4 (Sell). We expect a below average return from the stock in the next few months.


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