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Kraton Corporation Now a Strong Sell on Bleak Prospects


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Zacks Investment Research downgraded Kraton Corporation (KRA - Snapshot Report) to a Zacks Rank #5 (Strong Sell) on Sep 29, 2016. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market over the next few quarters.

Why the Downgrade?

Kraton Corporation’s financial performance in second-quarter 2016 was disappointing, with earnings of 63 cents per share falling short of the Zacks Consensus Estimate of 69 cents by 8.7%. The company recorded rise in costs and operating expenses in the quarter, partially offsetting the positive impacts from revenue increase.

For 2016, Kraton Corporation predicts that weakness in the global adhesive markets will adversely impact its results for the Polymer and Chemical segments. Both the businesses are likely to suffer from high volumes and pricing pressures in the industry. Citing these concerns, Kraton Corporation has narrowed down its earnings before interest, tax, depreciation and amortization guidance to $370−$380 million from the prior forecast of $370−$390 million.

Bleak prospects have made investors doubtful regarding Kraton Corporation’s performance in the quarters ahead. Over the last 60 days, the Zacks Consensus Estimate for the stock has decreased 5.1% to $2.78 per share for 2016 and by 14.2% to $3.51 per share for 2017. Also, the estimate decreased by 7.9% to 70 cents for third quarter 2016.

KRATON CORP Price and Consensus


KRATON CORP Price and Consensus | KRATON CORP Quote

Stocks to Consider

Kraton Corporation currently has a market capitalization of $1.1 billion. Better-ranked stocks in the chemical industry include Green Plains Inc. (GPRE - Snapshot Report) , Ingevity Corporation (NGVT - Snapshot Report) and NL Industries Inc. (NL - Snapshot Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Green Plains and NL Industries have witnessed positive revisions in bottom-line estimates for 2016 and 2017 over the last 60 days.

Estimates for Ingevity Corporation have also been revised upward for 2016 and 2017. Also, the company holds positive an Earnings ESP of +3.09% for 2016 and +2.51% for 2017.

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