It has been about a month since the last earnings report for Calgon Carbon Corporation . Shares have lost about 17.4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Calgon Carbon Q2 Earnings in Line, Sales Top Estimates
Calgon Carbon reported net income of $5.9 million or 12 cents per share in second-quarter 2017, compared with a profit of $7.9 million or 15 cents per share recorded a year ago.
Barring one-time items, adjusted earnings were 14 cents per share that were in line with the Zacks Consensus Estimate.
Calgon Carbon recorded net sales of $153 million in the reported quarter, up around 15.4% year over year. The figure beat the Zacks Consensus Estimate of $150.6 million.
The increase in sales was mainly due to contribution of the New Business (the wood-based activated carbon and filtration media business) which was acquired in Nov 2016.
Revenues from the company’s core Activated Carbon segment increased 9.8% year over year to $135.7 million in the reported quarter. The increase was mainly due to higher net sales of environmental air (which includes mercury removal products), potable water, industrial and specialty processes market in the Americas, which more than offset the estimated lower anticipated activated carbon pellet sales in Japan for treating nitrogen oxide and sulfur emissions, lower sales of potable water market in Europe and lower environmental water market sales in the Americas due to the completion of a major remediation project in 2016.
The Alternative Material segment’s revenues increased around five-fold year over year to $12.9 million as the perlite filtration and diatomaceous earth media products of New Business contributed $11 million to reported quarter sales.
Sales from the Advanced Water Purification segment declined 31.2% year over year to $4.4 million in the quarter due to lower traditional ultraviolet water disinfection equipment and ion exchange project sales, partly offset by modestly higher sales of ballast water treatment system.
Calgon Carbon ended the quarter with cash and cash equivalents of roughly $24.1 million, down roughly 52.9% year over year. Long-term debt was $241.4 million, up roughly 137.6% year over year.
According to Calgon Carbon, second-quarter 2017 performance benefited from improved year-over-year demand of activated carbon products and services, steady execution from New Business to achieve robust quarterly sales growth and the company’s diverse end markets. The company is also optimistic about its industrial sector customers.
Moving ahead, Calgon Carbon expects sequential improvement in gross margin and operating expense. The company expects sales and profitability to improve in the second half of 2017. The company also sees growth in its legacy business sales for the full year, which is expected to benefit from improved demand of activated carbon products in North America.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted down by 13.9% due to these changes.
At this time, the stock has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. Following the exact same course, the stock was allocated also a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.