Chemours has shaken off its post IPO depression and is moving up on a strong earnings beat. The high on the June IPO was $22.25 and the low in January was $3. That had to be very depressing for shareholders.
NEW BULLISH Plays
CC - Chemours Co - Company Profile
The Chemours Company provides performance chemicals in North America, the Asia Pacific, Europe, the Middle East, Africa, and Latin America. It operates in three segments: Titanium Technologies, Fluoroproducts, and Chemical Solutions. The Titanium Technologies segment produces and sells titanium dioxide (TiO2) under the Ti-Pure brand name to deliver whiteness, brightness, opacity, and protection in various applications, such as architectural and industrial coatings, flexible and rigid plastic packaging, PVC window profiles, laminate papers, coated paper, and coated paperboard used for packaging. The Fluoroproducts segment provides fluoroproducts, such as hydrofluorocarbon refrigerants, and fluoropolymer resins and downstream products and coatings under the Teflon brand name. The Chemical Solutions segment offers industrial and specialty chemicals used in gold production, oil refining, agriculture, industrial polymers, and other industries in North America. This segment provides cyanides; and performance chemicals and intermediates, such as clean and disinfect chemicals, aniline, methylamines, glycolic acid, Vazo free radical initiators, and reactive metals. Company description from FinViz.com.
This company has had a hard life since going public. Back in June Citron Research released a report critical of Chemours saying it was a "zero" because of lingering liabilities they inherited when DuPont spun them off. According to Citron they had liabilities for the manufacture of PFOA while it was part of DuPont. Citron said the company was "designed for bankruptcy" to rid DuPont of those lingering liabilities. Chemours issued a strong rebuttal. Bloomberg researched the background and said Chemours might have $800 million to $1.5 billion in risk. Anyone suing for contamination has to sue DuPont first and they have deep pockets. Chemours agreed to share some of the risk in the event of a judgment. In any event, it will be years before there is any real liability to Chemours.
Shares collapsed but at the same time David Einhorn raised his stake from 5.44 million shares to 8.44 million. If Einhorn is not worried, we should not be worried for a 30-45 day trade. We will exit before earnings. Argus upgraded them to a buy saying they had a significant competitive advantage becaus of their size, vertically integrated structure and rapid cost cutting.
Earnings Nov 3rd.
When they reported for Q2 they earned 27 cents compared to estimates for 17 cents. Revenue was $1.38 billion and missed estimates for $1.42 billion because of the sale of a division. The company said it was delivering $350 million in cost reductions and add $150 million in adjusted EBITDA through 2017. The prior quarter they earned 6 cents compared to estimates for a penny. They have history for strongly beating estimates.
They announced the sale of their sulfur business for $325 million and the sale of the Clean and Disinfect business for $230 million. The company is shedding noncore assets to improve profitability.
Zachs said analysts they follow are raising estimates but they still believe Chemours will post another beat. Based on Sach's proprietary indicators companies with the Chemours profile beat 70% of the time. Over the prior week the 2016 consensus estimate rose from 63 cents to 77 cents. For 2017 the estimates rose from $1.10 to $1.27, which is 64% over 2015 levels.
A week ago, a large investor sold 2,000 October $10 calls for $2.90 and reinvested the gain into 4,200 January $15 calls for $1.
With a CC trade at $13.75
Buy CC shares, currently $13.62, initial stop loss $12.00.
No options recommended because of price. The Oct $15 is 65 cents but time is short. The next available series is January and very expensive.
NEW BEARISH Plays
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