Shares of specialty chemical company Chemours (NYSE:CC) jumped nearly 14% as trading opened for the day. Although they quickly settled down to a mid-single-digit gain by 10 a.m. EDT, the quick jump was clearly a reaction to the company's earnings, which were released after the close yesterday.
Chemours' top line fell slightly, going from $1.4 billion in the first quarter of 2019 to $1.3 billion in the same period of 2020. Although the company's titanium coatings business did well (sales were up 10% in the segment), its other two divisions (fluoroproducts and chemical solutions) saw year-over-year sales declines. One key factor in the quarter was pricing, which was weak across all of the business. Adjusted earnings per share, meanwhile, was up 13% year over year despite the headwinds. Margins improved across the company. All in, it was a solid quarter and investors reacted in an upbeat manner.
However, Chemours was sure to point out that it had started to feel the impact of COVID-19-related economic shutdowns as the first quarter drew to a close. It noted, not unreasonably, that the economic hit from the global effort to slow the spread of the coronavirus has clouded the future. Management has, thus, pulled its full-year guidance. It has also started a cost-cutting program and trimmed its capital budget by a fairly substantial 30%. Chemours appears to be battening down the hatches as it prepares for a storm.
Although the first quarter obviously pleased investors, the bigger picture is that demand for Chemours chemical products was already starting to weaken in the first quarter. That situation is likely to get worse in the second quarter, and perhaps for longer, as the world deals with the coronavirus. It appears that management is hinting strongly that 2020 could be a tough year from here on out. Long-term investors should pay attention.