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Why Is Chemours (CC) Down 18.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Chemours (CC - Free Report) . Shares have lost about 18.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Chemours due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Chemours’ Q3 Earnings Beat, Revenues Trail Estimates

Chemours logged a profit of $275 million or $1.51 per share in the third quarter of 2018, up from $207 million or $1.08 a year ago. Adjusted earnings came in at $1.49 per share, which topped the Zacks Consensus Estimate of $1.38.

Net sales rose around 3% year over year to $1,628 million, mainly driven by strong demand in Fluoroproducts and higher global average selling prices in Titanium Technologies. However, the figure trailed the Zacks Consensus Estimate of $1,715.8 million.

The company recorded adjusted EBITDA of $435 million in the quarter, up 14% year over year. The results were driven by higher sales, partly offset by increased raw material costs.

Segment Highlights

Revenues in the Fluoroproducts segment rose 7% year over year to $682 million. Broad-based demand for Opteon and base refrigerants as well as fluoropolymer products boosted sales in the quarter.

Revenues in the Chemical Solutions unit amounted to $155 million, up 5% year over year. Weaker demand for intermediates products and performance chemicals affected the segment’s volumes.

Revenues in the Titanium Technologies division were $791 million, slightly down from $799 million in the prior-year quarter. Volume was lower compared to strong demand in the prior-year quarter, resulting from sustained inventory destocking by customers.

Financials

As of Sep 30, Chemours had cash and cash equivalents of $1,275 million, down roughly 16.9% year over year. Long-term debt was $3,985 million, down around 2.4% year over year.
 
The company generated operating cash flow of $342 million in the quarter, up more than three-fold year over year. Free cash flows for the quarter was around $226 million, down 30.2% from the year-ago quarter's tally. Capital expenditures were $116 million, up from $108 million in the year-ago quarter.

Chemours repurchased roughly $136 million of stock during the third quarter.

Outlook

Going forward, the company expects each of the segments to deliver solid year-over-year top- and bottom-line growth. For Fluoroproducts, it expects results to improve on the back of continued adoption of Opteon refrigerants and strong demand for fluoropolymers products. Moreover, Chemical Solutions unit is projected to continue to delivering improved performance driven by strong demand for mining solutions products. Chemours expects the Titanium Technologies segment to witness year-over-year improvement, despite expected volume loss due to customer destocking.

Chemours expects adjusted EBITDA within the lower half of its original guidance of $1.70-$1.85 billion. Free cash flow is expected to be roughly $650 million for 2018. Adjusted earnings per share are forecasted in the range of $5.10-$5.85.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -14.83% due to these changes.

VGM Scores

At this time, Chemours has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Chemours has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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