What occurred

Shares of Kronos Worldwide (KRO -14.21%) slid 15.8% by 11:30 a.m. ET this morning after the titanium dioxide pigment producer reported an excellent worse fourth quarter than buyers had anticipated.  

The corporate’s merchandise are used as a whitener in paints, cosmetics, paper, and different merchandise. Heading into the fourth-quarter report, analysts had forecast a lack of $0.07 per share on $319.8 million in gross sales. Because it turned out, Kronos cleared that income hurdle, with gross sales topping $342.2 million. But it surely whiffed on earnings, shedding $0.18 per share.  

So what

So an earnings miss however a income beat at first look seems to be like solely a blended quarter, and never ordinarily the sort of factor that might drive a inventory down 16%.

However whereas Kronos beat estimates on gross sales, that quantity nonetheless dropped 31% from the $496 million within the year-ago quarter, and that is positively dangerous information. Though administration did its greatest to chop prices to compensate for the income shortfall (value of products offered was down 19%, and promoting, normal, and administrative spending was 25% decrease 12 months over 12 months), it merely wasn’t capable of minimize them as quick as income was dropping.

End result: Kronos flipped to an working loss for the quarter, and a internet loss as nicely.

Now what

Kronos nonetheless managed to finish 2022 within the black, reporting a full-year revenue of $0.90 per share, down solely 8% from 2021. Nonetheless, that was a worse consequence than you’ll anticipate provided that full-year gross sales declined solely 0.5% 12 months over 12 months.

Checked out a technique, this leaves Kronos Worldwide inventory buying and selling for a seemingly modest 9.2 instances trailing earnings after in the present day’s inventory worth slide. However do not be fooled.

With extra debt than money on its steadiness sheet, gross sales on a decline, earnings within the crimson, and — on high of all that — no reassuring phrases from administration promising a return to profitability subsequent 12 months, the outlook for Kronos inventory proper now seems to be fairly grim. It appears extra like a worth entice than a worth inventory to me.