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Why Orion Engineered Carbons Stock Is Plunging Today

By Matthew DiLallo - Updated Apr 12, 2019 at 9:56AM

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The Carbon Black supplier disappointed investors.

What happened

Shares of Orion Engineered Carbons ( OEC 2.58% ) plunged more than 17% by 3:00 p.m. EST on Friday. The Carbon Black maker -- which is a commercial form of solid carbon used by a range of industries -- sold off after reporting fourth-quarter results, which included a disappointing outlook for 2019.

So what

Orion Engineered Carbons hauled in $386 million in revenue during the fourth quarter, which was 13.6% higher than the year-ago period, mainly because it was able to pass through higher costs to customers via price increases. Adjusted earnings, meanwhile, came in at $0.48 per share, which beat the consensus estimate by $0.01 per share.

A bright red arrow going down

Image source: Getty Images.

However, while earnings and revenue appeared strong, the underlying numbers weren't quite as good. Volumes, for example, fell 6.1% year over year thanks to lower rubber volumes in South Korea due to the closing of a plant as well as reduced exports to China. Adjusted EBITDA also slipped 2.3% to $64.4 million as its margins tightened.

Meanwhile, Orion Engineered Carbon provided a relatively dour outlook on 2019. The company's forecast sees adjusted EBITDA ranging between $280 million and $300 million this year, which is 1.5% lower than 2018's level at the midpoint. The company's CEO, Corning Painter, discussed in the earnings release the headwinds that are driving this muted view:

Demand, through a mix of destocking and underlying market conditions has softened in our specialty business. This has become particularly evident in China cutting across several end markets. While some of the China export markets should benefit from improved trade conditions, the China automotive segment may have a longer cycle to recovery.

Check out the latest earnings call transcript for Orion Engineered Carbons.

Now what

Painter further noted that if current market conditions persist, Orion Engineered Carbon's 2019 results would likely be at the low end of its range, with it needing not only robust rubber demand, but a pickup in its specialty business in China during the second half to secure a high-end finish. Because of that, the company's stock price could remain under pressure until there are clear signs that demand is on the upswing.

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Stocks Mentioned

Orion Engineered Carbons S.A. Stock Quote
Orion Engineered Carbons S.A.
OEC
$18.72 (2.58%) $0.47

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