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Quaker Houghton (KWR - Free Report) is a Zacks Rank #5 (Strong Sell) that develops, produces and markets a range of formulated chemical specialty products for various heavy industrial and manufacturing applications.
The stock has struggled since November and after a recent earnings report, might continue to give bulls a hard time
About the Company
Quaker Houghton was founded in 1962 and is headquartered in Conshohocken, PA. The company has a market cap of $3.3 billion and employs 4,700.
The company offers metal removal fluids, cleaning fluids, corrosion inhibitors, metal drawing and forming fluids, die cast mold releases, heat treatment and quenchants, metal forging fluids, hydraulic fluids, specialty greases, metal finishing fluids, offshore sub-sea energy control fluids, rolling lubricants, rod and wire drawing fluids, and surface treatment chemicals.
KWR pays a small dividend of 0.88% and has Forward PE of 25. The stock holds a Zacks Style Score of “B” in Growth, but “D” in both Value.
Q4 Earnings
The company has a pretty good track record of beating earnings, beating 10 quarters in a row going into 2022. However, the recent quarter was reported with a 20% EPS miss.
Raw material pressures and supply chain disruptions were to blame. While the company saw record net sales, the negatives are cutting into the bottom line.
Jefferies was out with analysis focusing on the raw material headwinds. They see issues continuing throughout the first half of the year, with price hikes partially offsetting the cost pressures. However, they don’t see full margin recovery until 2023.
For those reasons, analysts like Jefferies and others are lowering estimates.
Estimates for the current quarter have seen a drop over the last 30 days, falling from $1.80 to $1.58, or 12%. For the current year, estimates have fallen 9% over that same time frame, from $8.25 to $7.54.
The negatives all are short-term, so perhaps things can improve if raw material costs stabilize. For now, the pressure remains, so investors must prepare for the estimates to drop further.
Technical Take
Quaker Houghton investors have had a great decade. The stock has gone from $50 just ten years ago to $300 last year. Most of that appreciation came over the last two years, when the stock jumped from a COVID bottom low of $107 to $301 early last year.
With the stock under $200 and the company facing fundamental issues, investors are unsure where to buy the dip.
The stock is coming off its recent lows of $167, but should find some resistance at the 50-day MA at $195. The stock likely struggles until it can bulls take back that level.
For now, dip buyers can rely on the 21-day moving average at $181. However, if that breaks, the recent lows could be in play.
In Summary
Quaker Houghton will have to get past its short-term fundamental issues before the stock gets back on track. For now, there is no evidence raw material headwinds have improved, so investors should avoid the stock.
For an investor interested in material space, a better option might be Hawkins (HWKN - Free Report) . The stock is a Zacks Rank #1 (Strong Buy) and the company is coming off a 23% EPS beat.
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Bear of the Day: Quaker Houghton (KWR)
Quaker Houghton (KWR - Free Report) is a Zacks Rank #5 (Strong Sell) that develops, produces and markets a range of formulated chemical specialty products for various heavy industrial and manufacturing applications.
The stock has struggled since November and after a recent earnings report, might continue to give bulls a hard time
About the Company
Quaker Houghton was founded in 1962 and is headquartered in Conshohocken, PA. The company has a market cap of $3.3 billion and employs 4,700.
The company offers metal removal fluids, cleaning fluids, corrosion inhibitors, metal drawing and forming fluids, die cast mold releases, heat treatment and quenchants, metal forging fluids, hydraulic fluids, specialty greases, metal finishing fluids, offshore sub-sea energy control fluids, rolling lubricants, rod and wire drawing fluids, and surface treatment chemicals.
KWR pays a small dividend of 0.88% and has Forward PE of 25. The stock holds a Zacks Style Score of “B” in Growth, but “D” in both Value.
Q4 Earnings
The company has a pretty good track record of beating earnings, beating 10 quarters in a row going into 2022. However, the recent quarter was reported with a 20% EPS miss.
Raw material pressures and supply chain disruptions were to blame. While the company saw record net sales, the negatives are cutting into the bottom line.
Jefferies was out with analysis focusing on the raw material headwinds. They see issues continuing throughout the first half of the year, with price hikes partially offsetting the cost pressures. However, they don’t see full margin recovery until 2023.
For those reasons, analysts like Jefferies and others are lowering estimates.
Quaker Houghton Price and Consensus
Quaker Houghton price-consensus-chart | Quaker Houghton Quote
Estimates
Estimates for the current quarter have seen a drop over the last 30 days, falling from $1.80 to $1.58, or 12%. For the current year, estimates have fallen 9% over that same time frame, from $8.25 to $7.54.
The negatives all are short-term, so perhaps things can improve if raw material costs stabilize. For now, the pressure remains, so investors must prepare for the estimates to drop further.
Technical Take
Quaker Houghton investors have had a great decade. The stock has gone from $50 just ten years ago to $300 last year. Most of that appreciation came over the last two years, when the stock jumped from a COVID bottom low of $107 to $301 early last year.
With the stock under $200 and the company facing fundamental issues, investors are unsure where to buy the dip.
The stock is coming off its recent lows of $167, but should find some resistance at the 50-day MA at $195. The stock likely struggles until it can bulls take back that level.
For now, dip buyers can rely on the 21-day moving average at $181. However, if that breaks, the recent lows could be in play.
In Summary
Quaker Houghton will have to get past its short-term fundamental issues before the stock gets back on track. For now, there is no evidence raw material headwinds have improved, so investors should avoid the stock.
For an investor interested in material space, a better option might be Hawkins (HWKN - Free Report) . The stock is a Zacks Rank #1 (Strong Buy) and the company is coming off a 23% EPS beat.