Calgon Carbon Up on Strong View, Q1 Earnings Flat - Analyst Blog

Calgon Carbon CCC reported profit of $9.8 million or 18 cents per share in the first quarter of 2014, flat year over year. Earnings per share were in line with the Zacks Consensus Estimate.

The Pennsylvania-based pollution control company posted revenues of $131.6 million in the reported quarter, down 2.5% year over year. Lower sales across activated carbon and equipment businesses offset an increase in the consumer unit. Currency translation also unfavourably affected sales, stemming from a weaker yen. Sales also matched the Zacks Consensus Estimate.

Calgon Carbon provided an upbeat outlook for the second quarter, expecting sales for the quarter to be one of the best in its history. Its shares were up as much as 5.4% in the trading session following the announcement. The stock has gained around 26% over a year.   

Segment Performance

Revenues from the company's core Activated Carbon and Service segment edged down 1% year over year to $117.7 million in the quarter due to lower demand for activated carbon products across municipal drinking water market in the U.S., environmental air market in Asia and industrial process market in Europe, offset by increased demand for granular activated carbon in the food market.

Equipment division's revenues fell 24.7% year over year to $10.5 million on lower sales for ballast water treatment and traditional ultraviolet light systems.

Sales from the Consumer segment jumped 54% year over year to $3.4 million in the quarter on increased demand for activated carbon cloth from a major customer.

Financial Position

Calgon Carbon ended the quarter with cash and cash equivalents of $36.2 million, a roughly two-and-a-half fold year over year rise. Total debt was $55.7 million, down roughly 13% year over year but up around 62% sequentially.

Outlook

Calgon Carbon expects sales to rise more than 10% sequentially in the second quarter on strength in the global drinking water market. The quarter is expected to be strong for both sales and earnings. Increased sales volumes, favourable sales mix and cost-saving measures are expected to contribute to a significant sequential improvement in margins.

Calgon Carbon has reduced its capital spending target for 2014 and now expects to spend between $75 million and $80 million for the year versus $85 million expected earlier. It made capital spending of roughly $8.6 million in the reported quarter.

Calgon Carbon should benefit from the implementation of cost reduction program and corporate initiatives. Moreover, the company will continue to capitalize on opportunities for revenue growth from environmental regulations for mercury removal from coal-fired power plants and for ballast water treatment.

Calgon Carbon is a Zacks Rank #3 (Hold) stock.

Other companies in the pollution control industry worth considering include Fuel-Tech, Inc. FTEK, Vertex Energy, Inc. (VTNR) and Pure Cycle Corporation PCYO. While Fuel-Tech and Vertex carry a Zacks Rank #1 (Strong Buy), Pure Cycle sports a Zacks Rank #2 (Buy).

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