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Orion Engineered (OEC)
NYSE:OEC
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Orion Engineered
(NYSE:OEC)
61Neutral
Positive Factors
Earnings
CEO noted the company is positioned to achieve higher earnings levels over several years without additional growth capital.
Share Repurchase
OEC acquired 0.5M shares, reducing net shares outstanding by 6% over the past 2 years, which is an attractive allocation of capital.
Specialty Segment Performance
Specialty Adj. EBITDA increased 44% year-over-year on +9% volume, with volume recovery appearing broad-based both regionally and by application.
Negative Factors
Currency Weakness
Key currencies for the company, such as the Euro, Brazil, and S. Korean currencies, have been weaker since the last guidance, posing additional challenges.
Oil Prices
The company's profitability is negatively impacted by the recent increase in oil prices, which will affect profits until prices are adjusted.
Tire Imports Impact
OEC's rubber black demand continues to be negatively impacted by tire imports into Western markets.
Orion Engineered (OEC) vs. S&P 500 (SPY)
Market Cap
$732.54M
Dividend Yield0.64%
Average Volume (3M)626.79K
Price to Earnings (P/E)17.1
Beta (1Y)1.02
Revenue Growth-0.87%
EPS Growth-56.55%
CountryUS
Employees1,658
SectorBasic Materials
Sector Strength60
IndustryChemicals - Specialty
Share Statistics
EPS (TTM)0.75
Shares Outstanding56,654,100
10 Day Avg. Volume515,250
30 Day Avg. Volume626,791
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.41
Price to Cash Flow (P/CF)2.00
P/FCF Ratio8.10
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$19.75Price Target Upside56.13% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering4
Orion Engineered Business Overview & Revenue Model
Company DescriptionOrion Engineered Carbons S.A., together with its subsidiaries, manufactures and sells carbon black products in Germany, the United States, South Korea, Brazil, China, South Africa, the rest of Europe, and internationally. It operates in two segments, Specialty Carbon Black and Rubber Carbon Black. The company offers post-treated specialty carbon black grades for coatings and printing applications; high purity carbon black grades for the fiber industry; and conductive carbon black grades for polymers, coatings, and battery electrodes. It also provides rubber carbon black products for applications in mechanical rubber goods under the PUREX brand, as well as in tires under the ECORAX brand name. The company was formerly known as Orion Engineered Carbons S.à r.l. and changed its name to Orion Engineered Carbons S.A. in July 2014. Orion Engineered Carbons S.A. was founded in 1862 and is headquartered in Senningerberg, Luxembourg.
How the Company Makes MoneyOrion Engineered Carbons makes money primarily through the production and sale of carbon black products, which are integral to numerous industries. Its revenue model is based on manufacturing and distributing carbon black for use in tires, coatings, plastics, and other industrial applications. The company benefits from long-term contracts and partnerships with key players in the automotive and industrial sectors, ensuring a steady demand for its products. Additionally, Orion's focus on research and development allows it to offer specialized and high-performance grades of carbon black, which can command premium pricing in the market.
Orion Engineered Financial Statement Overview
Summary
Orion Engineered's financial results reflect a challenging environment with declining revenues and profits, coupled with concerning leverage and equity issues. While operational cash flows remain strong, the company's balance sheet instability and reduced profitability pose significant risks. The overall financial health indicates the need for strategic improvements to enhance stability and growth.Income Statement
Orion Engineered has seen a decline in revenue from $2.03 billion in 2022 to $1.88 billion in 2024, indicating a negative growth trajectory. The gross profit margin has decreased from 22.1% in 2023 to 22.8% in 2024, while the net profit margin also fell from 5.5% to 2.4%, showing reduced profitability. Despite a consistent EBITDA margin around 5.5%, the decline in EBIT margin to 5.5% from 10.8% signifies operational challenges. Overall, the income statement reflects diminished revenues and profitability.55
Neutral
Balance Sheet
The company's balance sheet reveals a concerning equity situation, with stockholders' equity dropping to zero in 2024. The debt-to-equity ratio is not applicable for 2024 due to zero equity. Historically, the equity ratio has been weak, falling from 25% in 2022 to 0% in 2024, indicating high leverage. Return on Equity (ROE) is unmeasurable for 2024, reflecting financial instability. The balance sheet suggests significant financial leverage and potential risks.40
Negative
Cash Flow
Orion Engineered's cash flow statement shows a volatile free cash flow, dropping from $173 million in 2023 to $125 million in 2024. The operating cash flow to net income ratio improved to 2.83 in 2024, indicating robust cash generation relative to net income. However, the free cash flow to net income ratio has declined, highlighting issues in cash retention after capital expenditures. Despite strong operational cash flows, the cash flow statement underscores concerns over sustaining positive free cash flow.60
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.88B | 1.89B | 2.03B | 1.55B | 1.14B | Gross Profit |
| 428.80M | 451.00M | 448.80M | 386.60M | 292.35M | EBIT |
| 102.70M | 205.30M | 197.10M | 145.60M | 74.38M | EBITDA |
| 102.70M | 327.20M | 302.80M | 244.90M | 149.89M | Net Income Common Stockholders |
| 44.20M | 103.50M | 106.20M | 134.70M | 18.20M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 44.20M | 37.50M | 60.80M | 65.70M | 68.50M | Total Assets |
| 1.86B | 1.83B | 1.89B | 1.63B | 1.39B | Total Debt |
| 1.03B | 927.20M | 915.30M | 782.90M | 738.44M | Net Debt |
| 983.30M | 889.70M | 854.50M | 717.20M | 673.58M | Total Liabilities |
| 1.38B | 1.35B | 1.43B | 1.31B | 1.21B | Stockholders Equity |
| 474.90M | 478.50M | 459.40M | 319.70M | 181.01M |
| Cash Flow | Free Cash Flow | |||
| 125.30M | 173.10M | -151.80M | -69.50M | -19.66M | Operating Cash Flow |
| 125.30M | 345.90M | 81.00M | 145.20M | 125.28M | Investing Cash Flow |
| -206.70M | -172.80M | -232.80M | -214.70M | -144.94M | Financing Cash Flow |
| 89.30M | -197.10M | 149.30M | 73.30M | 13.54M |
Orion Engineered Technical Analysis
Negative
12.65
Price Trends
13.91
Negative
15.29
Negative
17.08
Negative
Market Momentum
-0.27
Positive
36.25
Neutral
14.20
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For OEC, the sentiment is Negative. The current price of 12.65 is below the 20-day moving average (MA) of 13.38, below the 50-day MA of 13.91, and below the 200-day MA of 17.08, indicating a bearish trend. The MACD of -0.27 indicates Positive momentum. The RSI at 36.25 is Neutral, neither overbought nor oversold. The STOCH value of 14.20 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for OEC.
Orion Engineered Risk Analysis
Orion Engineered disclosed 37 risk factors in its most recent earnings report. Orion Engineered reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Orion Engineered Peers Comparison
Overall Rating
UnderperformOutperform
Sector (47)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
70 Outperform | $4.51B | 11.02 | 31.02% | 2.07% | 1.71% | -2.43% | |
61 Neutral | $732.54M | 17.08 | 9.27% | 0.64% | -0.87% | -56.55% | |
61 Neutral | $3.04B | 28.27 | 6.35% | 1.58% | 0.99% | -27.62% | |
61 Neutral | $860.47M | 9.98 | 10.61% | 6.42% | 13.24% | ― | |
57 Neutral | $2.78B | 21.03 | 0.18% | 2.73% | -4.35% | -115.63% | |
51 Neutral | $1.11B | ― | -2.60% | 7.10% | 7.82% | 84.90% | |
47 Neutral | $2.64B | -3.19 | -22.16% | 3.30% | 3.88% | -30.15% |
* Basic Materials Sector Average
Performance Comparison
OEC
Orion Engineered
12.65
-11.18
-46.92%
ASH
Ashland
57.78
-36.86
-38.95%
CBT
Cabot
84.00
-7.39
-8.09%
FUL
H.B. Fuller Company
57.18
-20.78
-26.65%
KRO
Kronos Worldwide
7.38
-4.11
-35.77%
TROX
TRONOX
6.77
-9.52
-58.44%
Orion Engineered Earnings Call Summary
Earnings Call Date: Feb 19, 2025 | % Change Since: -13.59% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Neutral
Orion's earnings call highlighted the company's strong performance in specialty segments and significant achievements in sustainability, alongside a promising free cash flow outlook. However, demand weakness in the rubber segment, inflationary pressures, and geopolitical uncertainties pose challenges. Overall, the sentiment is balanced, considering both strong company fundamentals and external headwinds.Highlights
Achieved $300 Million EBITDA
Despite late Q4 demand weakness in the rubber segment, Orion finished 2024 with an EBITDA just over $300 million, which is 14% above pre-COVID earnings levels.
Strong Specialty Segment Recovery
The specialty segment showed strong volume recovery in 2024, with full year volumes advancing 11% and a 9% year-over-year growth in Q4.
Sustainability Achievements
Orion achieved EcoVadis’s platinum rating, positioned in the 99th percentile for sustainability, and led in ISCC PLUS certifications for production sites.
Free Cash Flow Inflection
Orion expects a sharp improvement in free cash flow beginning in 2025, with CapEx being significantly reduced and free cash flow expected to exceed $100 million in 2026.
Share Repurchase Program
Orion bought back nearly $20 million worth of stock in 2024 and continued repurchases in 2025, reducing the share count by 7% in just over two years.
Lowlights
Demand Weakness in Rubber Segment
Late Q4 demand weakness in the rubber segment, primarily due to pressures from elevated tire import levels, resulted in a 2% decrease in volume year-over-year.
Adverse Impact of Inflation and FX
The economic environment in 2024 was challenged by mixed consumer confidence and inflationary pressures impacting customer trading behavior in tire markets.
Operational Challenges in China
Operational issues in China impacted Orion's performance, though they expect these to be resolved in 2025 with improvements in bulk production lines.
Geopolitical Uncertainty
Ongoing geopolitical tensions and the uncertainty of trade policies, including the potential impact of Russian carbon black imports, remain a risk factor.
Company Guidance
During the Orion Fourth Quarter and Full Year 2024 Earnings Conference Call, the company provided guidance for 2025, projecting adjusted EBITDA to reach a midpoint of $310 million, reflecting 7% to 8% constant currency growth. This forecast assumes flat market conditions and no benefits from potential tariffs yet. The guidance also includes expectations for the adjusted EPS to range between $1.45 and $1.90, with a tax rate assumption of approximately 30%. The company anticipates a significant improvement in free cash flow, projected to be between $40 million and $70 million, driven by a sharp reduction in CapEx, lower cash taxes, and improved EBITDA performance. Key factors contributing to this outlook include higher rubber volumes, better specialty demand and mix, resolution of operational challenges in China, a higher cogeneration contribution, and benefits from cost actions offsetting adverse foreign exchange and inflationary costs.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.