Calgon Carbon Corporation(NYSE: CCC)

Transcription

1 Sep 20, 2016 Calgon Carbon Corporation(NYSE: CCC) $14.73 USD ( As of 09/19/16 ) Zacks Rank 4-Sell Style:Value: Growth: Momentum: VGM: Data Overview 52 Week High-Low $ $ Day Average Volume 235,448 Beta 1.10 Market Cap M Dividend / Div Yld $0.20 / 1.36% Industry POLLUTION CNTRL Industry Rank 109 / 265 (Top 41%) Current Ratio 3.77 Summary Estimates for Calgon Carbon have been stable of late. The company continues to be affected by a still weak global economy. It continues to witness sluggishness in industrial market applications. The company is seeing weak demand for activated carbon in specific markets. Calgon Carbon is also exposed to weakness in its equipment business and currency headwinds. Elements of the Zacks Rank Agreement Estimate Revisions ( days) Debt/Capital 20.42% Net Margin 6.42% 100% 67% 100% 100% Price/Book (P/B) 1.83 Price/Cash Flow (P/CF) Q1 (Current Qtr) Q2 (Next Qtr) F1 (Current Year) F2 (Next Year) Earnings Yield 4.32% Debt/Equity 0.26 Up: 0 Down: 3 Up: 1 Down: 2 Up: 0 Down: 3 Up: 0 Down: 3 Value Score Magnitude Consensus Estimate Trend ( days) P/E (F1) P/E (F1) Rel to Industry PEG Ratio NA P/S (F1) 1.43 P/S (TTM) 1.44 P/CFO Q % Q % F % F2-3.06% P/CFO Rel to Industry 9.03 EV/EDITDA Annual 7.99 Upside Zacks Consensus Estimate vs. Most Accurate Estimate Growth Score Proj. EPS Growth (F1/F0) % Hist. EPS Growth (Q0/Q-1) Qtr CFO Growth Yr CFO Growth Return on Equity (ROE) 10.71% Most Accurate: 0.14 Zacks Consensus: 0.14 Q1 0.00% Most Accurate: 0.22 Zacks Consensus: 0.22 Q2 0.00% Most Accurate: 0.62 Zacks Consensus: 0.62 F1 0.00% Most Accurate: 0.95 Zacks Consensus: 0.95 F2 0.00% (NI - CFO) / Total Assets Asset Turnover 0.78 Surprise Reported Earnings History Momentum Score 1 week Volume change 7.56% 1 week Price Cng Rel to Industry -0.67% (F1) EPS Est 1 week change 0.00% (F1) EPS Est 4 week change 0.00% Reported: 0.15 Estimate: 0.17 Q End 06/16 Reported: 0.11 Estimate: 0.16 Q End 03/16 Reported: 0.15 Estimate: 0.16 Q End 12/15 Reported: 0.23 Estimate: 0.25 Q End 09/15 Average 4 Qtr Surprise (F1) EPS Est 12 week change % (Q1) EPS Est 1 week change 0.00% 2016 Zacks Investment Research, All Rights Reserved 10 S. Riverside Plaza Suite 10 Chicago, IL 6

2 The data on the front page and all the charts in the report represent market data as of 09/19/16, while the reports text is as of 09/20/2016 Overview Calgon Carbon Corporation (CCC) is a Pennsylvania-based pollution control company that manufactures products and provides services to decontaminate and deodorize liquids and gases. It is a global leader in the manufacture, reactivation, and application of activated carbon, ballast water treatment, ultraviolet light disinfection, and advanced ion-exchange technologies The company has three operating segments based on product line and associated services - Activated Carbon and Service, Equipment and Consumer. Activated Carbon and Service segment: The sale of activated carbon is the principle component of the Activated Carbon and Service business segment. The company is the world s largest manufacturer of granular activated carbon products and sells more than 100 types of granular, powdered, and pelletized activated carbons made from coal, wood or coconut. This segment manufactures granular, powered and extruded carbon. These chemicals remove and absorb organic compounds from liquids and gases. Granular activated carbon (GAC) is especially useful in water purification. Equipment segment: The Equipment segment provides solutions to air and water purification problems through the design, fabrication and operation of systems that utilize a combination of the company s enabling technologies: carbon adsorption as well as UV and advanced ion exchange separation among others. The company participates in five primary areas: Potable Water, Industrial Process, Food, Environmental Water, Environmental Air and Specialty Markets. Consumer segment: This segment brings consumer purification technologies in the form of products and services including carbon cloth. Carbon cloth, which is activated carbon in cloth form, is manufactured in the UK and sold to the medical, military, and specialty markets. The Activated Carbon and Service segment accounted for roughly 91% of the company sales in 2015 with Equipment and Consumer segments representing 7% and 2%, respectively. Zacks Equity Research: CCC Page 2 of 7

3 Reasons To Sell: The Equipment segment generally has a long project life cycle from bid solicitation to project completion, and often requires customers to make large capital commitments well in advance of project execution. The division continues to struggle, as witnessed by lower sales in the last reported quarter. In addition, this business is usually affected by the general health of the overall economy. As a result, sales and earnings from the Equipment segment could be volatile. Moreover, orders for new Hyde Ballast Water Treatment System (BWTS) remains soft in offshore markets due to lower oil demand and a strong dollar. Calgon Carbon s industrial end-markets remain sluggish. The company is seeing weak demand for activated carbon in specific markets. It is also exposed to weakness in its equipment business and currency headwinds. Calgon Carbon s industrial end-markets is expected to remain sluggish in the near term. Market conditions for industrial waste water applications and environmental air projects remain weak. The company is also seeing weak demand for activated carbon in specific markets. A slowdown in the global economy, weakness in industrial markets and soft demand for mercury removal products are affecting the company s results. Market uncertainties are expected to sustain in the short haul. Moreover, delay in several North American municipal water carbon exchange projects (that have been shifted from the first quarter to late 2016) may continue to affect its top line. Moreover, currency remains a headwind for the company. Currency swings had a $22.8 million unfavorable impact on its full-year 2015 sales. Unfavorable currency translation stemming from a stronger greenback had a $1.1 million negative impact on its top line in first-quarter While currency had an immaterial impact in the second quarter, the company sees an unfavorable impact of $0.5 million to $1 million for the third quarter. The company uses bituminous coal as the main raw material in the activated carbon production process. Interruptions in coal supply caused by mine accidents, labor disputes, transportation delays, breach of supplier contractual obligations, floods or other events for periods longer than normal could have an adverse effect on its ability to meet customer demand. Coal is currently in high demand. Calgon Carbon s inability to obtain high-quality coal at competitive prices in a timely manner due to changing market conditions with limited high-quality suppliers could also have an adverse affect on its financial results. In addition, increases in the prices for coal under its supply contracts could impact the financial results by significantly raising production costs. The Activated Carbon business faces competition from Norit N.V. (the Netherlands, Europe), Westvaco Corporation (Virginia, U.S.) and Siemens Water (Pennsylvania, U.S.), along with the European and Chinese producers and East Asian producers of coconutbased activated carbon. UV technology products face significant competition from Trojan Technologies Inc. (Ontario, Canada), jointly owned by Danaher Corporation (Washington, U.S.) and Wedeco Ideal Horizons (Charlotte, North Carolina) owned by ITT Industries (New York, U.S.). In each case, competitors include major manufacturers and other diversified companies, a number of which are more resourceful and can adapt better to developing more advanced or cost-effective technologies, increase market share or leverage distribution networks. Calgon Carbon could experience reduced net sales as a result of having fewer resources than these competitors. Risks Calgon Carbon continues to diversify and grow both through its product offerings and increased penetration into new and emerging end markets and geographies. It believes that mercury removal could become the largest U.S. market for activated carbon and has made great strides in establishing itself as a market leader. The company is seeing healthy demand for its products from utility customers and believes that it has captured roughly % share of the North American mercury removal market. Calgon Carbon s reactivation facilities have remarkably helped in its growth and have established its presence in different markets. The global demand for reactivation services is expected to climb, as regulations for water quality strengthen around the world. Calgon Carbon has embarked on aggressive cost reduction initiatives to boost margins. The company s cost improvement program, which includes consolidation of operations and headcount reductions, is expected to offer savings in raw material costs, warehousing, transportation and personnel expenses, among others. Calgon Carbon recently announced an additional costimprovement program that is expected to generate annual savings of more than $10 million. The company also has a healthy balance sheet. Calgon Carbon exited the most recent quarter with a cash balance of $51.2 million, a roughly 2% year-over-year rise. Calgon Carbon's fully-owned subsidiary, Calgon Carbon Japan (CCJ) announced that it has inked a contract with Mitsui & Co. Plant Systems, Ltd. to supply pelletized activated carbon. Per the contract, CCJ s products have to be reasonably sized and activated to meet the requirements of WPS s newly installed Regenerative Activated Coke Technology (ReACT) multi-emission control system. This is the first use of activated carbon pellets for this type of application in the U.S. The annualized revenues are estimated to be $6 million through Last Earnings Report Calgon Carbon s Q2 Earnings Lag, Sales Top Estimates Quarter Ending 06/2016 Calgon Carbon logged a profit of $7.9 million or $0.15 per share in second-quarter 2016, Report Date Aug 05, 2016 Sales Surprise 2.65% Zacks Equity Research: CCC Page 3 of 7

4 roughly a 37.3% drop from $12.6 million or $0.24 per share recorded a year ago. Earnings per share missed the Zacks Consensus Estimate of $0.17. Calgon Carbon raked in revenues of $132.6 million in the reported quarter, down around 2.1% year over year. Sales, however, surpassed the Zacks Consensus Estimate of $129 million. EPS Surprise % Quarterly EPS 0.15 Annual EPS (TTM) 0.64 Gross margin (excluding depreciation and amortization), in the reported quarter was 33.9%, compared with 37.5% in the year-ago quarter. The decline was mainly due to lower volume of higher-margin products. Segment Performance Revenues from the company s core Activated Carbon and Service segment decreased roughly 2% year over year to $121.1 million in the second quarter. Potable water and specialty market sales increased in all geographic regions. These increases were offset by lower sales of powdered activated carbon for treating coal-fired power plant mercury emissions in North America, and reduced sales to industrial and food market customers in all geographic regions. The Equipment division s revenues declined around 8.3% year over year to $8.8 million. Higher sales of carbon adsorption equipment and ion exchange equipment was more than offset by reduced ballast water treatment system sales. Sales from the Consumer segment jumped 18.2% year over year to $2.6 million in the quarter on the back of an increase in the sale of carbon cloth for defense applications. Financial Position Calgon Carbon ended second-quarter 2016 with cash and cash equivalents of $51.2 million, up from $50.1 million as of Jun, Long term debt was $101.6 million as of Jun, 2016, up from $87.3 million as of Jun, Outlook Calgon Carbon declared the establishment of an additional cost-improvement program that is expected to generate savings of more than $10 million, most of which are projected to be realized in This brings the total targeted annual cost and efficiency improvements from the inception of the company s cost-improvement program that started in 2012, to over $ million. Calgon Carbon also said that CECA completed the works council consultation process and the former signed the definitive purchase deal related to its planned acquisition of the European wood-based activated carbon and filter aid business of Arkema Group. The company remains on track to complete the transaction in the fourth quarter and expects it to be accretive to earnings in 2017 by $0.08 $0.11 per share, barring any purchase accounting impacts, and to add incremental value thereafter. Recent News Calgon Carbon's Hyde Marine Partners with Bactest, Ltd. - Sep 6, 2016 Calgon Carbon said that Hyde Marine, which is a trade name for the company s UV technologies, has entered into a new, nonexclusive, partnership with Bactest, Ltd. The partnership allows Hyde Marine to sell rapid compliance tools with its Hyde Guardian Gold Ballast Water Treatment Systems (BWTS). Bactest, Ltd, based in the U.K, has developed an integrated ballast water testing system called Speedy Breedy SeaSure that tests ballast water for microbial compliance to the D2 standard. The system puts in data from other ballast water testing equipment into a secure Ballast Water Log suitable for audit trail and transmission to interested parties such as port state authorities. Bactest has designed a secure output to allow this Ballast Water Log to be downloaded onto the Hyde Guardian Gold system log to store the data and offer a one-stop log for regulators to evaluate treatment system performance. Speedy Breedy SeaSure is the only instrument in the market that can be used on ships or in port to test if they adhere to the IMO standard for the 3 bacteria set out in the standard. The partnership will make sure that the ship owners who use chemical-free Hyde Guardian Gold BWTS abide by the ballast water treatment standards and are able to display this compliance to Port State Control officers. With the addition of Bactest Speedy Breedy SeaSure to its portfolio, Hyde Marine will be able to provide the owners with a faster tool to validate ballast water treatment The Hyde Guardian Gold BWTS uses efficient filtration and ultraviolet disinfection to treat ships' ballast water to prevent the spread of invasive species from port to port. Hyde Marine, as part of Calgon Carbon UV Technologies, LLC, has emerged as a leading U.S. manufacturer and educator regarding regulations, technologies, installation experiences, and challenges facing maritime sector. Zacks Equity Research: CCC Page 4 of 7

5 Industry Analysis Zacks Industry Rank: 109 / 265 (Top 41%) Top Peers CECO ENVIRNMNTL (CECE) CASELLA WASTE (CWST) DONALDSON CO (DCI) ENERGY RECOVERY (ERII) HERITAGE-CRYSTL (HCCI) H2O INNOVATION (HEOFF) LANDAUER INC (LDR) LIQTECH INTL (LIQT) MAGNEGAS CORP (MNGA) Industry Comparison Pollution Cntrl Position in Industry: 10 of 13 Industry Peers CCC Market Cap M # of Analysts 5 Dividend Yield 0.32% Growth Score Hist. EPS Growth (3-5 yrs) % Proj. EPS Growth (F1/F0) % Curr. Cash Flow Growth -1.36% Hist. Cash Flow Growth (3-5 yrs) 3.91% Current Ratio 3.77 Debt/Capital 20.42% Net Margin 6.42% Return on Equity 10.71% Sales/Assets 0.78 Proj. Sales Growth (F1/F0) -2.73% Value Score Cash/Price EV/EBITDA 7.99 PEG Ratio NA Price/Book (P/B) 1.83 Price/Cash Flow (P/CF) P/E (F1) Price/Sales (P/S) 1.43 Earnings Yield 4.32% Debt/Equity 0.26 Cash Flow ($/share) 1.53 Momentum Score Daily Price Chg 0.70% 1 Week Price Chg -0.67% 4 Week Price Chg 0.07% 12 Week Price Chg 2.64% 52 Week Price Chg % 20 Day Average Volume 206,772 (F1) EPS Est Wkly Chg 0.00% (F1) EPS Est Mthly Chg 0.00% (F1) EPS Est Qtrly Chg % (Q1) EPS Est Mthly Chg 0.00% X Industry S&P M B % 1.74% % 7.52% 18.20% 7.26% 9.91% 4.41% 6.63% 8.09% % 42.32% -1.28% 9.57% 3.32% 15.90% % 2.75% % 5.35% % 0.96% -0.36% -0.03% 0.00% -2.44% 1.56% -0.06% % 7.23% 49, % 0.00% 0.00% 0.03% 0.36% 0.88% 0.00% 0.00% CECE CWST DCI M M 4.82 B % 0.00% 1.47% NA NA % 0.22% 4.39% % % 2.80% % % 4.39% 33.55% % -5.21% 63.83% 6.51% -0.50% % NA 31.32% -0.18% -1.28% 8.59% 13.48% 64.65% 26.23% % 2.07% 0.02% 1.14% 1.93% -0.06% -0.08% -0.06% 0.39% -3.00% -3.55% -2.71% 20.57% 15.00% 0.33% 24.07% 35.29% 18.64% 226, , ,8 0.00% 0.00% 0.35% 0.00% 0.00% -1.51% 3.28% % -2.62% -1.25% 0.00% -4.11% Zacks Equity Research: CCC Page 5 of 7

6 Zacks Rank Education The Zacks Rank is calculated from four primary inputs: Agreement, Magnitude, Upside and Surprise. Agreement This is the extent which brokerage analysts are revising their earnings estimates in the same direction. The greater the percentage of estimates being revised higher, the better the score for this component. For example, if there were 10 estimate revisions over the last days, with 8 of those revisions up, and the other 2 down, then the agreement factor would be 80% positive. If, however, 8 were to the downside with only 2 of them up, then the agreement factor would be 80% negative. The higher the percentage of agreement the better. Magnitude This is a measure based on the size of the recent change in the current consensus estimates. The Zacks Rank looks at the magnitude of these changes over the last days. In the chart to the right, the display shows the consensus estimate from -days ago, -days ago, 7-days ago, and the most current estimate The difference between the current estimate and the estimate from -days ago is displayed as a percentage. A larger positive percentage increase will score better on this component. Upside This is the difference between the most accurate estimate, as calculated by Zacks, and the consensus estimate. For example, a stock with a consensus estimate of $1.00, and a most accurate estimate of $1.05 will have an upside factor of 5%. This is not an indication of how much a stock will go up or down. Instead, it's a measure of the difference between these two estimates. This is particularly useful near earnings season as a positive upside percentage can be used to help predict a future surprise. Surprise The Zacks Rank also factors in the last few quarters of earnings surprises. Companies that have positively surprised in the recent past have a tendency of positively surprising again in the future (or missing if they recently missed). A stock with a recent track record of positive surprises will score better on this factor than a stock with a history of negative surprises. These stocks will have a greater likelihood of positively surprising again. Zacks Style Score Education The Zacks Style Score is as a complementary indicator to the Zacks Rank, giving investors a way to focus on the best Zacks Rank stocks that best fit their own stock picking preferences. Academic research has proven that stocks with the best Growth, Value, and Momentum characteristics outperform the market. The Zacks Style Scores rate stocks on each of these individual styles and assigns a rating of A, B, C, D and F. An A, is better than a B; a B is better than a C; and so on. Value Score Growth Score Momentum Score VGM Score As an investor, you want to buy stocks with the highest probability of success. That means buying stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Style Score of an A or a B. Zacks Equity Research: CCC Page 6 of 7

7 Disclosures The analysts contributing to this report do not hold any shares of this stock. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts' personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. Zacks Equity Research: CCC Page 7 of 7