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Why Shares of GrafTech International Jumped Higher Today

By Lou Whiteman – Aug 6, 2020 at 12:01PM

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Earnings came in better than expected.

What happened

Shares of GrafTech International (EAF -0.11%) soared 12% higher at the open Thursday, and traded up nearly 8% as of 11 a.m. EDT, after the company reported better-than-expected quarterly results. GrafTech shareholders have endured a rough run so far in 2020, but the company's quarter was not nearly as bad as some had feared.

So what

Before markets opened on Thursday, GrafTech said it earned $0.35 per share in the second quarter on revenue of $280.7 million, easily beating analyst consensus estimates for $0.22 per share in earnings on revenue of $226 million. Revenue was down 41% year over year, but investors went into earnings season knowing it has been a rough environment for the company.

Hot steel roll.

Image source: Getty Images.

GrafTech is a manufacturer of graphite electrodes used in steel production. Its customers have been hit hard by the COVID-19 pandemic, which has caused a fall in industrial production that has led to declines in steel demand. To make matters worse, GrafTech's majority shareholder has been slowly selling down its stake, putting added pressure on the sales.

The net result is shares of GrafTech are down nearly 40% year-to-date even after Thursday's climb.

Now what

GrafTech is doing what it can to minimize the impact of the pandemic, but with its customers struggling there is only so much the company can do. GrafTech said it expects overall demand and pricing to remain low for the remainder of 2020.

"The second half of 2020 will continue to be challenging as we and our customers face macro-economic headwinds," GrafTech said in the company's earnings statement. "We foresee a measured recovery in the industry when the pandemic eases as customers work through inventory levels that were elevated prior to the onset of the pandemic."

For long-term investors, there is a lot to like about GrafTech. The company is a leading supplier of a core component of electric arc steel furnaces, which should take an increasing share of the overall steel market because they are more environmentally friendly and make it easier for steel producers to meet tightening regulatory requirements.

The near-term forecast remains hazy, but investors on Thursday were enjoying a rare bit of good news from GrafTech. 

Lou Whiteman owns shares of GrafTech International Ltd. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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