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Zacks Investment Research downgraded Tronox Limited (TROX - Snapshot Report) to a Zacks Rank #5 (Strong Sell) on Jan 8, 2014.

Why the Downgrade?

Tronox Limited’s third quarter 2013 results were disappointing. The company reported a loss per share of 48 cents versus net earnings of 20 cents per share in the year-ago quarter. Also, the loss exceeded the Zacks Consensus Estimate of a loss of 14 cents by 242.9%.

Sales came in at $491 million, up just 0.8% over the year-ago quarter. Gains in the Pigment segment were offset by weak performance of the company’s Mineral Sands and Corporate and Other segments. The negative impact from Eliminations was lower in the quarter compared to the year-ago quarter.  

With respect to costs/margins of Tronox Limited, an increase of 21.3% was recorded in cost of sales that led to a 15.8% fall in gross margin.

Tronox Limited’s poor performance in the quarter triggered a downward revision in earnings estimates. In the last 60 days, the Zacks Consensus Estimate has slipped from earnings of 23 cents per share to a loss of 30 cents per share for 2014. The negative earnings surprise of 136.7% in the last four quarters along with the Zacks Consensus Estimate slipping into a loss for 2014 raises concerns over the company’s performance in the forthcoming quarters.  

Other Stocks to Consider

Tronox Limited is a $2.6 billion company producing and marketing titanium ore and titanium dioxide in the Americas, Europe and the Asia-Pacific. Some better-ranked stocks in the chemical specialty industry include Chemtura Corporation (CHMT - Snapshot Report), HB Fuller Co. (FUL - Snapshot Report) and Globe Specialty Metals, Inc. (GSM - Snapshot Report). All these companies carry a Zacks Rank #2 (Buy).

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