What happened
Tronox Holdings (TROX 1.87%) has been on fire for some months, and February was no different: Shares of the chemical maker jumped 19.5% last month, according to data provided by S&P Global Market Intelligence. With those gains, Tronox stock hit a new 52-week high in February. Solid earnings, a dividend hike, and strong outlook were the big triggers.
So what
Tronox delivered a solid set of fourth-quarter and full-year numbers on Feb. 17, in line with preliminary numbers that it announced mid-January, which even sent the stock soaring double-digits briefly.
Tronox's Q4 revenue jumped 13% year over year, driven by 8% growth in volumes for its key product, titanium dioxide (TiO2). TiO2 is a key raw material for the paint and coatings industry, and is also widely applied in industries like plastics, paper, textiles, and automotive.
Image source: Getty Images.
TiO2 prices have shot up in recent months on rising global demand for the pigment as economies reopen after the COVID-19 pandemic-induced lockdowns. Do-it-yourself paint products, in particular, are seeing unprecedented demand since the coronavirus outbreak, which has been a boon for TiO2 manufacturers. Meanwhile, global supply of TiO2 has been tight as major producers were forced to curtail production during the lockdown.
Now what
Players across the industry project strong market growth. Chemours (CC 1.14%), for example, expects the TiO2 market to grow by a mid- to high-single-digit percentage in 2021. Tronox sees 11%-15% growth in TiO2 sales volume in the first quarter of 2021, which should boost its top and bottom lines. Meanwhile, Tronox is also expediting the development of its Atlas-Campaspe mine to replace supply of raw material from the Snapper and Ginkgo mines, which are nearing the end of operations.
To top the encouraging Q1 outlook, investors in Tronox have yet another reason to cheer: The company announced a 14% hike in its dividend last month, effective in the first quarter. With Tronox yielding 1.7% and the TiO2 market looking strong, this cyclical stock may have entered an up cycle.
