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Why Shares of Tronox Holdings Are Climbing Today

By Lou Whiteman – Feb 26, 2020 at 2:07PM

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An earnings beat and dividend boost reassures investors after a period of transition.

What happened

Shares of Tronox Holdings (TROX -0.62%) were up 6% on Wednesday afternoon, and jumped 12% earlier in the day, after the materials producer delivered better-than-expected quarterly earnings and boosted its dividend by 56%. The company sees challenging times ahead but seems to be managing through the worst of it.

So what

Tronox reported fourth-quarter adjusted earnings of $0.14 per share -- $0.02 better than expectations -- on revenue that came in about $25 million short of consensus at $693 million. The company, a producer of titanium dioxide used as a pigment for coatings, is in a period of transition after acquiring rival Cristal's North American Titanium Dioxide business last year.

White pigment on a white background.

Image source: Getty Images.

The company said that the Cristal acquisition is going better than planned, saying it expects to generate total annual synergies of $190 million in 2020 and see that number grow to $325 million by 2022.

"Our global team is moving forward in 2020 together as one new Tronox," CEO Jeffry Quinn said. "We remain focused on execution and delivery of our vertical integration strategy, which is creating an enterprise that displays greater stability in financial performance and cash generation throughout the cycle."

Tronox also said it would increase its dividend to an annual payout of $0.28 per share, up from $0.18 per share, "reinforcing confidence in our business model and ability to generate strong free cash flow throughout cycles."

Now what

Tronox sees full-year 2020 revenue of $3 billion to $3.3 billion, up from $2.6 billion in 2019 thanks in part to a full year's worth of Cristal contributions, and free cash flow of more than $200 million. Quinn said he sees continued "global macro-economic uncertainty" and softness in demand for zircon, balanced by an expected uptick in titanium dioxide demand.

Shares of Tronox are down more than 33% over the past year, in part due to investor concerns about the company's ability to manage its more than $3 billion in debt in difficult macro conditions and the threat of a recession. The company's fourth-quarter results seem to have restored some confidence, but Tronox still has a lot of work to do in the quarters ahead.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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