Why Tronox's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of titanium dioxide maker Tronox (NYSE: TROX  ) fell as much as 25% today, after the company released earnings.

So what: In the third quarter, revenue rose 5%, to $487.3 million, and income from continuing operations was $25.6 million, or $0.21 per share. But analysts had expected revenue of $532.1 million and earnings of $0.45 per share, so these results were a huge disappointment to investors.

Now what: An earnings miss is never good, but this was a huge miss on both the top and bottom line. Management said that it was still purchasing feedstock from prior contracts, and cost of goods sold will fall when the company is operating on a more vertically integrated basis. To make matters worse, the company bought back 12.6 million shares at an average price of $25.85, about $10 above today's price.

Earnings have swung wildly in recent quarters and, while I have hope for the company's value in the future, I simply can't be a buyer after such a disappointing profit.

Interested in more info on Tronox? Add it to your watchlist by clicking here.


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  • Report this Comment On November 14, 2012, at 10:35 AM, wowiraptor wrote:

    You can't be a buyer of a stock that is now trading at substantial discount to Book at 0.6

    Financials TROX.N Industry Sector

    P/E (TTM): 0.98 11.09 30.52

    EPS (TTM): 15.55 -- --

    ROI: 41.91 6.09 10.41

    ROE: 73.12 10.21 10.85

    with a sweet dividend to hedge against your positions of nearly 6.5% at current pricing

    has its own feedstock of Ti to sustain its tiO2 business unlike nay other competitor Including Dupont. In a paniced market situation which has seriously overreacted to the earnings release of Trox...

    Seriously ?

    It has all the catalysts you need to make a quick 25% on the bounce in the next 2 months at this level with the div to boost that return.

    as to earnings have swung wildly...yes they have its the TiO2 industry which is heavily reliant on supplying pigments every thing from frosting in your hostess cupcakes to toothpaste to pait for your house....

    and if you haven't heard the housing market has been steadily improving whcich means more demand for Tio2...sure gonna take a few months but the price of trox now is allot better than it has been and steeply discounted.

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