|
Related Topics
|
Category: Stock Market and Stepan
Date: 24 October 2019 Stock Price: $95.68 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Stepan Company, a global manufacturer of speciality and intermediate chemicals used across various industries including agriculture and personal care
|
About Stepan Company
Stepan is a major global manufacturer of specialty and intermediate chemicals used in a broad range of industries. Although Stepan is classified with other specialty chemical companies, it is unique in the industry and does not have a competitor or competitors to precisely match its businesses because its products have a specific focus.
Surfactants
Stepan produces surfactants, which are the key ingredient in consumer and industrial cleaning compounds. Manufacturers of detergents, fabric softeners, hard surface cleaners, shampoos, lotions, toothpastes and cosmetics depend on surfactants to achieve the cleaning, foaming and emulsifying qualities required of their products.
The company also produces germicidal quaternary compounds. These cleaning products are used in consumer and industrial products that kill germs, mold and mildew. Hospitals and restaurants depend on these products for the safety and hygiene of their premises.
Industrial uses for surfactants are in foamers in gypsum wallboard, emulsifying and moisture repellence of paints and coatings, and emulsifiers to facilitate the spreading and application of agricultural products.
Polymers
The polymer product group includes phthalic anhydride, polyurethane polyols and polyurethane systems. Phthalic anhydride is used in plasticizers, polyester and alkyd resins for applications in construction materials, automotive and marine applications as well as other consumer products. Polyurethane polyols are used in the manufacture of laminate board for the construction industry in addition to coatings, adhesives, sealants and elastomers formulations. Polyurethane systems provide reinforcement and thermal insulation and are sold to the construction, industrial, aerospace and appliance markets.
Specialty Products
Specialty Products manufactured by Stepan are in consumer applications such as natural flavors for the beverage industry. Other applications are the esters, fats and oils used as emulsifiers, solubilizers and alternate fats for the food and pharmaceutical industry.
Surfactants
Stepan produces surfactants, which are the key ingredient in consumer and industrial cleaning compounds. Manufacturers of detergents, fabric softeners, hard surface cleaners, shampoos, lotions, toothpastes and cosmetics depend on surfactants to achieve the cleaning, foaming and emulsifying qualities required of their products.
The company also produces germicidal quaternary compounds. These cleaning products are used in consumer and industrial products that kill germs, mold and mildew. Hospitals and restaurants depend on these products for the safety and hygiene of their premises.
Industrial uses for surfactants are in foamers in gypsum wallboard, emulsifying and moisture repellence of paints and coatings, and emulsifiers to facilitate the spreading and application of agricultural products.
Polymers
The polymer product group includes phthalic anhydride, polyurethane polyols and polyurethane systems. Phthalic anhydride is used in plasticizers, polyester and alkyd resins for applications in construction materials, automotive and marine applications as well as other consumer products. Polyurethane polyols are used in the manufacture of laminate board for the construction industry in addition to coatings, adhesives, sealants and elastomers formulations. Polyurethane systems provide reinforcement and thermal insulation and are sold to the construction, industrial, aerospace and appliance markets.
Specialty Products
Specialty Products manufactured by Stepan are in consumer applications such as natural flavors for the beverage industry. Other applications are the esters, fats and oils used as emulsifiers, solubilizers and alternate fats for the food and pharmaceutical industry.
Overview of Stepan's 3rd quarter 2019 earnings report
Data below refers to quarterly data unless specified otherwise:
- Net sales: $451.582 million (down from $507.997 million for the same period of the previous year)
- Total revenues decreased by -11.1% over the last 12 months
- Cost of sales: $374.180 million (down from $424.421 million for the same period of the previous year)
- Total expenses decreased by -11.8% over the last 12 months
- Net income: $25.880 million (up from $21.754 million for the same period of the previous year)
- Diluted earnings per share: $1.11 (up from $0.93 for the same period of the previous year)
- PE ratio of Stepan Company.: 21.5
- Dividend declared: $0.25
- Dividend yield of Stepan Company: 1.05%
- Dividend yield of Stepan Company: 1.05%
- Diluted weighted-average shares outstanding: 23.3 million (up from 23.288 million for the same period of the previous year)
- Cash and cash equivalents: $286 million
- Cash and cash equivalents per share: $12.27
- Cash and cash equivalents makes up 6.11% of Stepan Company's market capital
- Cash and cash equivalents makes up 12.8% of Stepan Company's total assets
- Goodwill: $20.5 billion
- Goodwill per share: $78.84
- Goodwill makes up 29.9% of Anthem's total assets
- Stockholders equity in Stepan Company.: $854.2 million
- Stockholders equity per share in Stepan Company: $136.66
- So Stepan Company is trading at 2.61 times its stockholders equity per share which is within the expected range of between 2 and 4 most firms tend to trade at
Stepan Company's management commentary on their 3rd quarter results
NORTHFIELD, Ill., Oct. 23, 2019 /PRNewswire/ -- Stepan Company (NYSE: SCL) today reported: Reported net income was $25.9 million, or $1.11 per diluted share versus $21.8 million, or $0.93 per diluted share, in the prior year. Adjusted net income* was $27.9 million, or $1.20 per diluted share versus $26.4 million, or $1.13 per diluted share, in the prior year.
"Despite the challenging current environment, the Company's quarterly net income and adjusted net income exceeded prior year, and through nine months, adjusted net income is ahead of last year's record," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer. "For the quarter, Surfactant earnings were down significantly due to lower commodity volumes in North America and the slow recovery of our business in Mexico. The Polymer business had a strong third quarter driven by global rigid polyol growth. Specialty Products income was down due to customer order patterns, but is expected to deliver significant profit growth for the year."
Shareholder Return
The Company paid $5.6 million of dividends to shareholders and repurchased $7.0 million of Company stock in the third quarter of 2019. During the first nine months of 2019 the Company paid $16.9 million of dividends and repurchased $13.2 million of Company stock. The Company has 349,830 shares remaining under its Board of Directors' share repurchase authorization. With the increased cash dividend in the fourth quarter of 2019, the Company has increased its dividend on its common stock for the 52nd consecutive year.
Outlook
"Adjusted net income for the first nine months of 2019 is up 2% from our record in 2018, despite the Mexican equipment failure and the decrease in commodity surfactant volumes. We believe our continued focus on end market diversification, Tier 2 and Tier 3 customers, as well as our cost-out activities should improve future Surfactant margins. We remain optimistic the Polymer business will deliver full year volume growth and incremental margin improvement versus 2018 given our strong rigid polyol growth in the first nine months. We believe full year Specialty Product results will improve versus 2018. Overall, despite the current year challenges, we have an opportunity to deliver another year of adjusted net income growth," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer.
"Despite the challenging current environment, the Company's quarterly net income and adjusted net income exceeded prior year, and through nine months, adjusted net income is ahead of last year's record," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer. "For the quarter, Surfactant earnings were down significantly due to lower commodity volumes in North America and the slow recovery of our business in Mexico. The Polymer business had a strong third quarter driven by global rigid polyol growth. Specialty Products income was down due to customer order patterns, but is expected to deliver significant profit growth for the year."
Shareholder Return
The Company paid $5.6 million of dividends to shareholders and repurchased $7.0 million of Company stock in the third quarter of 2019. During the first nine months of 2019 the Company paid $16.9 million of dividends and repurchased $13.2 million of Company stock. The Company has 349,830 shares remaining under its Board of Directors' share repurchase authorization. With the increased cash dividend in the fourth quarter of 2019, the Company has increased its dividend on its common stock for the 52nd consecutive year.
Outlook
"Adjusted net income for the first nine months of 2019 is up 2% from our record in 2018, despite the Mexican equipment failure and the decrease in commodity surfactant volumes. We believe our continued focus on end market diversification, Tier 2 and Tier 3 customers, as well as our cost-out activities should improve future Surfactant margins. We remain optimistic the Polymer business will deliver full year volume growth and incremental margin improvement versus 2018 given our strong rigid polyol growth in the first nine months. We believe full year Specialty Product results will improve versus 2018. Overall, despite the current year challenges, we have an opportunity to deliver another year of adjusted net income growth," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer.
Stepan Company (NYSE: SCL) stock price history
The image below, obtained from Google, shows the stock price history of Stepan over the last 5 years. And it's been a very good time for Stepan stockholders. 5 years ago the stock was trading at around $43.50 a stock and its currently trading at $234.82 a stock. That's a return of 119.9% returned to Stepan stockholders over the last 5 years.
The stock of Stepan is trading at a lot closer to its 52 week high of $101.84 than it is to its 52 week low of $69.17 which to us is a clear indication that the momentum and sentiment of Stepan stock is very positive at this point in time.
The stock of Stepan is trading at a lot closer to its 52 week high of $101.84 than it is to its 52 week low of $69.17 which to us is a clear indication that the momentum and sentiment of Stepan stock is very positive at this point in time.
Recent coverage of Stepan Company
The extract below discusses the latest regarding Anthem as obtained from TheStreet.com
NORTHFIELD, Ill., Oct. 23, 2019 /PRNewswire/ -- Stepan Company (NYSE: SCL) today reported: On October 22, 2019, the Board of Directors of Stepan Company approved an increase of $0.025 per share, or 10%, on its quarterly cash dividend on its common stock. The dividend of $0.275 per share is payable on December 13, 2019, to common stockholders of record on November 29, 2019. The increase marks the 52nd consecutive year in which the quarterly dividend rate on the Company's common stock has increased
NORTHFIELD, Ill., Oct. 23, 2019 /PRNewswire/ -- Stepan Company (NYSE: SCL) today reported: On October 22, 2019, the Board of Directors of Stepan Company approved an increase of $0.025 per share, or 10%, on its quarterly cash dividend on its common stock. The dividend of $0.275 per share is payable on December 13, 2019, to common stockholders of record on November 29, 2019. The increase marks the 52nd consecutive year in which the quarterly dividend rate on the Company's common stock has increased
Stepan Company (NYSE: SCL) latest stock valuation
So what is Stepan Company stock worth based on the release of their latest earnings report and their outlook for the rest of their 2019 fiscal year? Based on Stepan Company latest earnings report and their outlook our valuation models provide a target (full value) price for Stepan Company stock at $79.40 a stock. We therefore believe that the stock of Anthem Inc. is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $79.40 Therefore we believe a good entry point into Anthem Inc. stock is at $71.50 or below. We expect the stock price of Stepan Company to pull back from current levels in coming weeks and months to levels closer to our target (full value) price.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $79.40 Therefore we believe a good entry point into Anthem Inc. stock is at $71.50 or below. We expect the stock price of Stepan Company to pull back from current levels in coming weeks and months to levels closer to our target (full value) price.
Next earnings release date for Stepan
It is expected that Stepan Company (NYSE: SCL) 4th quarter and full fiscal 2019 earnings report will be released in late January 2020