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Why Is Kronos Worldwide (KRO) Down 21% Since Last Earnings Report?

A month has gone by since the last earnings report for Kronos Worldwide (KRO). Shares have lost about 21% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kronos Worldwide due for a breakout? 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 Estimates, Sales Beat

Kronos Worldwide logged profits of $45.9 million or 40 cents per share in second-quarter 2022, up from $25.7 million or 22 cents in the year-ago quarter. The figure missed the Zacks Consensus Estimate of 51 cents.

The bottom line in the reported quarter was driven by higher income from operations resulting from increased average TiO2 selling prices and favorable currency swings that offset higher production costs.

Net sales rose 18% year over year to $565.3 million, driven by higher average TiO2 selling prices. The top line surpassed the Zacks Consensus Estimate of $541.7 million.

Volumes and Pricing

TiO2 production volumes were down 4% year over year in the second quarter. TiO2 sales volumes fell 1% year over year.

TiO2 segment profit increased around 46% year over year to $69.5 million in the reported quarter. The upside was driven by a rise in average TiO2 selling prices, which were partly offset by increased production costs, including higher costs for raw materials and energy.

Average TiO2 selling prices rose 26% year over year in the quarter.

Financials

Kronos Worldwide ended the quarter with cash and cash equivalents of $371.2 million, up roughly 2% year over year. Long-term debt was $415.8 million, a roughly 12% year-over-year decline.

Outlook

Kronos expects the long-term outlook for its industry to remain positive. It will continue to monitor current and expected near-term customer demand levels and will align its production and inventories accordingly.

The company expects the disruptions to global markets to continue for the foreseeable future. These disruptions and other global events could also lead to weaker demand for TiO2 in the second half of 2022, Kronos noted.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -25.93% due to these changes.

VGM Scores

Currently, Kronos Worldwide has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Kronos Worldwide is part of the Zacks Chemical - Diversified industry. Over the past month, Methanex (MEOH), a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended June 2022 more than a month ago.

Methanex reported revenues of $1.14 billion in the last reported quarter, representing a year-over-year change of +6.5%. EPS of $1.16 for the same period compares with $1.24 a year ago.

Methanex is expected to post earnings of $1.15 per share for the current quarter, representing a year-over-year change of -10.9%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Methanex. Also, the stock has a VGM Score of A.


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