We believe that Kronos Worldwide, Inc. (KRO - Free Report) is a solid choice for investors seeking exposure in the chemical space. Development of new products and improvement of existing facilities as well as solid customer base in paper, coatings and plastics end markets and overseas markets like Europe and the Asia Pacific will work in the company’s favor.
The stock, with roughly $2.8 billion market capitalization, has been upgraded to a Zacks Rank #1 (Strong Buy) on Mar 13. Its investment appeal is further accentuated by a VGM Score of A.
Kronos Worldwide delivered better-than-expected earnings in three of the last four quarters, recording an average positive earnings surprise of 35.01%. Notably, the shares have rallied 9.8% in the last six months, outperforming 7.2% gain of the industry.
Why the Upgrade?
We are providing a snapshot of how Kronos Worldwide fared in the fourth quarter of 2017. Its earnings of 84 cents surpassed the Zacks Consensus Estimate by 71.43%. Net sales were up 36% year over year on the back of the rise in TiO2 sales volume and its average selling prices.
In the quarters ahead, we believe that expertise in the manufacturing of TiO2 products and providing related services to its customers in paper, coatings and plastics end markets will work in favor of Kronos Worldwide. Also, strengthening operations in international arenas — Europe accounted for 50% of TiO2 sales volume in 2017 while the Asia Pacific and the rest of the world accounted for 9% and 10%, respectively — and effective marketing strategies will be advantageous.
Research and development, aimed at uplifting the product quality, production process and application areas, remain a priority for Kronos Worldwide. In the present year, the company plans to spend approximately $19 million on research and development while its capital spending for the maintenance and improvement of existing facilities will total at $67 million. It anticipates its sales to grow over 2017-level, mainly driven by the expectation of higher average selling prices. Also, income from operations is anticipated to grow year over year with higher raw materials, partially offsetting the gains from higher average selling prices.
Also, the company remains focused on returning value to shareholders. In February 2018, the company announced 2 cents per share or roughly 13.3% hike in its quarterly dividend rate. Repurchase authorization of roughly 1.95 million shares was left at the end of 2017.
In the last 30 days, earnings estimates for Kronos Worldwide have been revised upward by one brokerage firm for 2018. The Zacks Consensus Estimate currently stands at $2.73 for 2018, reflecting an increase of 18.7% from a 30-day-ago tally.
Kronos Worldwide Inc Price and Consensus