Shares of Ferroglobe Ascend After Earnings

The specialty metal and materials company was able to meet expectations although its end markets are suffering.

Tyler Crowe
Tyler Crowe
Feb 26, 2019 at 12:41PM
Energy, Materials, and Utilities

What happened

Shares of silicon-metal manufacturer Ferroglobe (NASDAQ:GSM) are up 26% as of 12:00 p.m. EST today after the company reported fourth-quarter earnings that met analyst expectations. 

So what

Coming into the fourth quarter, expectations for the specialty materials maker were rather bleak. The company's stock cratered after the prior quarter's earnings report that showed end-market prices for its products deteriorated significantly in the latter half of 2018.

Rolled dollar bills growing taller.

Image source: Getty Images.

This quarter wasn't that much different than the prior quarter in terms of sales prices. The company reported that the average selling price per ton across all of its various products declined by 9.4%. The good news was that the company was able to offset some of these price declines with higher shipment volumes (up 23% from the prior quarter), cutting costs, and curtailed production at some of its less profitable silicon metal and manganese-based alloys businesses.

The result of these efforts was an adjusted net income loss of $0.05 per share, which was right where analysts expected the quarter to be. Considering the end-market weakness, though, it was likely better than what you would expect from Ferroglobe at those commodity prices. 

Check out the latest Ferroglobe earnings call transcript.

Now what

Ferroglobe produces niche products that most investors won't know intimately, so predicting where the market for them will go is difficult. Management seems to believe that the market for its products will remain weak for the foreseeable future, so it's likely that results like these will continue.

GSM Chart

GSM data by YCharts.

Ferroglobe has been an incredibly volatile stock for some time, and the merger between FerroAtlantica and Globe Specialty Metals back in 2016 hasn't been a value-generating offer. Management's moves to keep costs in check will likely help it get through this period of weakness, but these results weren't encouraging enough that a long-term investor should consider jumping into the stock.