Bear of the Day: Horsehead Holding (ZINC) - Bear of the Day
Horsehead Holding Corp. (
is the parent company of Horsehead Corporation, INMETCO and
Zochem. They are leading producer of zinc and zinc-based products
and recycler of electric arc furnace dust, nickel-bearing wastes
and nickel-cadmium batteries.
Headquartered in Pittsburgh, Pa., ZINC employs approximately 1,100 people and has production and recycling operations at seven facilities located in the U.S. and in Canada.
Disappointing Results and Guidance
The company reported its third quarter results on November 5, 2013. Consolidated net loss for the quarter was $2.7 million, excluding noncash charges associated with hedges, compared with earnings of $600,000 during the same quarter of 2012. The results were substantially short of the Zacks Consensus Estimates.
The company had a $1.2 million increase in sales was (excluding hedge charges), due to a 5.6% increase in price realization for zinc products. This was partially offset by 1.3% lower shipments of zinc products and a 16.6% decrease in nickel-based sales.
Results during the quarter were adversely affected by production disruptions at the Monaca facility, where they operated only 5 of 6 smelting furnaces for most of the quarter due to the temporary shutdown of 2 furnaces. Project delays also affected the results.
Company's processing plant at Monaca will be closed and replaced with a new plant in North Carolina. According to the company this new plant is expected to increase the annual EBITDA by $90 to $110 million when fully operational. The company expects to record severance and other shutdown related costs in the next couple of quarters.
Due to disappointing results, quarterly and annual estimates have been revised sharply downwards in the past few weeks by analysts.
Zacks Consensus Estimate for the current quarter now stands at ($0.12) per share versus ($0.01) per share, 60 days ago, while the fiscal year 2014 consensus estimate is $0.61 per share now, down from $0.78 per share.
The company has missed estimates in two of its last four quarters, with an average negative surprise of 103.75%. Downward estimates revisions sent ZINC to a Zacks Rank # 5 (Strong Sell) on November 6, 2013.
The Bottom Line
ZINC is currently Zacks Rank # 5 (Strong Sell) stock and it also has a longer-term recommendation of "Underperform".
The company has been trying to grow its existing business as well as explore acquisition and international expansion opportunities but earnings may continue to be volatile in the coming quarters till some of its major projects become operational.
Investors seeking exposure to Metal processing industry could consider Dynamic Materials (BOOM), which has a Zacks rank of 1 (strong Buy) and an outperform recommendation.
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