Tronox Inc. (TROX – Snapshot Report) recently reported Q1 15 results, and posted a big miss on both the top and bottom lines. The earnings and revenue miss was due to a large drop in titanium dioxide pricing coupled with a decline in overall volumes. Further, challenging global market conditions are not expected to improve in the short term, with inventories rising, and production staying at current levels. The combination of these issues has made Tronox the Zacks Bear of the Day.
This Zacks Ranked #5 (Strong Sell) company is a producer and marketer of titanium products. Titanium products offered by the company find its application in paints, coatings and plastics. The electrolytic and specialty chemicals find its application in the paper and battery industries. Tronox operates three separate mining operations. The company is headquartered in Oklahoma City, Oklahoma.
The declining pricing issue had a negative impact on both the Pigment and Mineral Sands segments. The Pigment segment saw selling prices down 13% y/y, and the Mineral Sands segment saw pricing decline by 2%. Further, Zircon volumes dropped by 9% y/y, sales volumes decreased by 11%, and prices were down 2% for the segment. Moreover, volumes were lower in Asia and Latin America, and prices saw a decline in all regions of business.
Estimates Graph
The graph below shows TROX’s historic price levels against the EPS consensus. As you can see estimates have been declining for quite some time.
Declining Estimates
Over the past 30 days, earnings estimates have declined for Q2 15, Q3 15, FY 15, and FY 16; Q2 15 fell from -$0.06 to -$0.16, Q3 15 dropped from -$0.14 to -$0.25, FY 15 plunged from -$0.63 to -$1.21, and FY 16 slipped from $0.67 to $0.54.
Bottom Line
Decreasing price levels and declining volumes in several areas creates massive headwinds for the company in Q2 and Q3 2015. While the Mineral Sands segment was the bright spot in the Q1 earnings story, management still has a rough road ahead of them.
If you are inclined to invest in the Chemical-Specialty segment, you would be best served to look into Chemtura Corp (CHMT – Snapshot Report), Ferro Corp (FOE – Snapshot Report), KMG Chemicals (KMG – Snapshot Report), or Westlake Chemical (WLKP – Snapshot Report), all of which carry a Zacks Rank #1, Strong Buy.
