Why Koppers Holdings Stock Flopped on Friday
Key Points
The specialty chemical company also whiffed on the top line.
It was hammered by increased logistics and materials costs.
Investors weren't particularly keen on holding on to Koppers Holdings (NYSE:KOP) stock as the trading week came to an end. The specialty chemical company posted an earnings report that fell short on both the top and bottom lines. With that considerable headwind, Koppers stock closed the day more than 24% down.
A tale of two line items
Koppers, which specializes in wood preservation and coal-tar distillation chemicals, published its third-quarter figures early Friday morning. The company's sales rose to just over $499 million from the year-ago result of $485 million. Net income not under generally accepted accounting principles (non-GAAP, or adjusted) went in the opposite direction, tumbling to slightly over $15 million ($0.77 per share) from more than $24 million.
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Neither headline metric came close to its consensus analyst estimate. On average, pundits tracking Koppers stock anticipated $512 million in sales and an adjusted net profit of $1.34 per share.
The company attributed its improvement in sales to volume increases in both the residential and industrial wood preservative segments. Materials and logistics costs, however, had a significant and negative effect on profitability.
Guiding for disappointment?
Management is clearly expecting the situation to remain challenging, as it cut several key full-year guidance items. Koppers now expects net sales to come in at roughly $1.9 billion; it previously guided to a range of $1.9 billion to $2 billion. The adjusted earnings per share (EPS) has been adjusted to $3.10 to $3.25 for the year, well down from the preceding $3.80 to $4.20. On a slightly brighter note, free cash flow guidance was raised to $115 million to $135 million; the previous estimate was $110 million to $130 million.
The next few months, and possibly quarters, will be challenging for Koppers, as management recently outlined fresh price hikes taking effect in 2027 to offset sustained higher costs. This surely won't be met with joy by the cost-sensitive railroads, utilities, and wood treatment businesses that buy from Koppers. I'd imagine the company will continue to struggle in such an environment.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.