Quaker Chemical (KWR) Q4 Earnings Top Estimates, Sales Lag

Quaker Chemical Corporation KWR swung to a profit (attributable to the company) of $7.8 million or 58 cents per share in the fourth quarter of 2018 from a loss of $9.8 million or 73 cents a year ago.

Barring one-time items including costs related to the company's pending combination with Houghton International, Inc and U.S. Tax Reform charges, adjusted earnings came in at $1.51 per share for the reported quarter, up from $1.27 a year ago. It also topped the Zacks Consensus Estimate of $1.40.

Net sales edged up 0.2% year over year to roughly $211.5 million in the quarter. It trailed the Zacks Consensus Estimate of $216 million. Higher volumes and selling price and favorable product mix were offset by the unfavorable impact from foreign currency swings.

Margins

The company’s gross profit in the reported quarter went up 1% year over year on the back of higher net sales. Gross margin for the quarter was 35.4%, up from 35.1% a year ago. Gross margin was aided by pricing actions and the mix of specific products sold that more than offset higher raw material costs.

Adjusted EBITDA was $29.6 million for the reported quarter, consistent with the prior-year quarter.

FY18 Results

Profits for full-year 2018 were $59.5 million or $4.45 per share, up nearly three-fold from $20.3 million or $1.52 recorded in 2017. Adjusted earnings were $6.04 per share, up from $5.01 a year ago.

Revenues for the year rose around 6% year over year to $867.5 million on the back of higher volumes and pricing as well as favorable product mix.

Financials

Quaker Chemical ended 2018 with cash and cash equivalents of around $104.1 million, up roughly 16% year over year. Long-term debt was $35.9 million, down around 41% year over year.

Net operating cash flow for 2018 was $78.8 million, up around 22% from $64.8 million in 2017.

Quaker Chemical paid dividend worth $4.9 million to its shareholders during the fourth quarter.

Outlook

Moving ahead, the company expects currency headwinds to continue in the first quarter of 2019. It also expects some challenges in its base markets, particularly China and EMEA automotive. However, the company expects to offset these headwinds through market share gains and sees its gross margins to be in the 36% range for the quarter. Quaker Chemical also expects good overall adjusted EBITDA growth for full-year 2019 amid market headwinds.

Zacks Rank & Stocks to Consider

Quaker Chemical currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, Israel Chemicals Ltd. ICL and Franco-Nevada Corporation FNV.

Kirkland Lake Gold has an expected earnings growth rate of 8.8% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have shot up around 128% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 10.8% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied around 35% over the past year.

Franco-Nevada has an expected earnings growth rate of 11.2% for the current year and carries a Zacks Rank #2. Its shares have gained roughly 7% in the past year.

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