On Nov 24, we issued an updated research report on Calgon Carbon (CCC). While the pollution control company is well placed to gain from its aggressive cost-reduction actions, capacity expansion and contract wins, it remains exposed to weakness in its equipment business.
Calgon Carbon's sales fell in the third quarter of 2014, reported on Nov 5, as a modest gain in the activated carbon business was offset by double-digit declines in other areas. Both revenues and earnings for the quarter missed the respective Zacks Consensus Estimate. The company expects its cost-reduction initiatives to drive earnings moving ahead.
Calgon Carbon, a Zacks Rank #3 (Hold) stock, remains confident in its ability to balance the need for future investment with its responsibility to provide short-term returns. The company’s strategic initiatives position it for significant growth in the long term.
Calgon Carbon is expanding carbon production capacity at its Pearl River and Big Sandy plants. Both expansion projects are expected to add roughly 20 million pounds of granular activated carbon to the company’s production through 2017.
Moreover, Calgon Carbon has embarked on aggressive cost reduction initiatives to boost margins. It remains well placed to meet its annual cost improvement target of $40 million by 2016.
Calgon Carbon also sees ballast water treatment, reactivation services and mercury removal as its basis for sustainable growth. It is witnessing healthy demand for its ballast water treatment systems and reactivation services, manifested by solid order gains and contract wins. The company’s reactivation facilities have also remarkably supported its growth and have established its presence in several markets.
However, Calgon Carbon’s Equipment division continues to struggle with declining sales. Lower sales of traditional UV systems contributed to a double-digit decline in sales in this business in the third quarter. Lower sales volumes and costs associated with ongoing investments in the ballast water treatment systems are impacting profitability in the equipment business.
Calgon Carbon is also seeing somewhat weak demand for activated carbon in specific markets including specialty carbon.
Other Stocks to Consider
Other companies in the pollution control industry worth considering are Perma-Fix Environmental Services Inc. (PESI), Progressive Waste Solutions Ltd. (BIN) and Heritage-Crystal Clean, Inc (HCCI). While both Perma-Fix and Progressive Waste Solutions hold a Zacks Rank #1 (Strong Buy), Heritage-Crystal Clean retain a Zacks Rank #2 (Buy).
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