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Koppers Shares Pop 2% on Mixed Q2 Results
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Koppers Shares Pop 2% on Mixed Q2 Results

Koppers Holdings, Inc. (KOP), a global provider of treated wood products, wood treatment chemicals, and carbon compounds reported mixed second-quarter results, with earnings outpacing the consensus estimates. Shares popped 2.1% closing at $30.90 on August 6.

The company reported adjusted earnings of $1.41 per share, up 11% year-over-year, and beat the analysts’ estimate of $1.36 per share.

Net sales for the quarter grew 1% to $441 million, but fell short of the consensus estimate of $461.67 million. (See Koppers stock charts on TipRanks)

Notably, sales in the company’s Railroad and Utility Products and Services (RUPS) segment declined 6.9% year-over-year, as increased prices led to customers deferring their purchases.

On a positive note, Koppers’ Performance Chemicals (PC) segment witnessed a 6.2% year-over-year growth in sales driven by strong demand in international markets coupled with favorable pricing trends in the Americas. However, North America showed poor performance due to the lumber price volatility.

Similarly, the company’s Carbon Materials and Chemicals (CMC) segment improved sales by 11.5% on a year-over-year basis, aided by price increases.

Koppers president and CEO Leroy Ball said of his company’s outlook, “While the second half of 2021 will be challenging due to inflationary pressures and volatility of lumber markets impacting the demand of various product segments, I am happy to report that at halfway through the year, we still expect to achieve our seventh consecutive year of growth in adjusted EBITDA and are on pace for a new high in adjusted EPS.”

Based on its current global economic view, Koppers guided for full-year 2021 sales to fall in the range of $1.7-1.8 billion, while the consensus estimate for sales is pegged at $1.74 billion.

Additionally, full-year 2021 adjusted earnings are projected to be in the range of $4.35-4.60 per share compared to the Street’s estimate of $4.49 per share.

Prior to the earnings announcement, Barrington analyst Christopher Howe reiterated a Buy rating on the stock with a price target of $42 implying 35.9% upside potential to current levels.

Howe noted, “Under the scenario of slight to moderate top-line growth, profit improvement, and profit sustainability across each of the segments, a comfortable leverage ratio in the range of 2.0-3.0x and the potential for incremental benefit from infrastructure spending, we believe, over the long term, there is reason for more consistent share price accretion and multiples more in line with its peer Stella Jones, Inc. (SJ)”

Based on three unanimous Buys, the stock has a Strong Buy consensus rating. The average Koppers price target of $44 implies 42.4% upside potential to current levels. Shares have gained 17.4% over the past year.

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