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Orion Engineered Carbons SARL (OEC)
:OEC
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Orion Engineered
(NYSE:OEC)
Rating:60Neutral
Price Target:
$11.50
▲( 9.21% Upside)
Positive Factors
Financial Performance
Orion is expected to have a free cash flow yield of approximately 15.5% due to sharply lower anticipated capital expenditures following the completion of an expansion project.
Market Position
Orion is a leading producer of carbon black, with a strong market position and over 900,000 tons in annual volume and 9% market share.
Negative Factors
Economic Uncertainties
The investment rating on Orion was lowered from Overweight to Neutral due to economic uncertainties creating valuation risk.
Oil Prices
The company's profitability is negatively impacted by the recent increase in oil prices, which will affect profits until prices are adjusted.
Valuation
The valuation gap between Orion and its peer Cabot is now considered to be within a reasonable range, limiting the opportunity for Orion’s trading multiples to expand.
Orion Engineered (OEC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$592.52M
Dividend Yield0.79%
Average Volume (3M)644.91K
Price to Earnings (P/E)23.1
Beta (1Y)1.03
Revenue Growth-2.31%
EPS Growth-69.16%
CountryUS
Employees1,658
SectorBasic Materials
Sector Strength64
IndustryChemicals - Specialty
Share Statistics
EPS (TTM)0.22
Shares Outstanding56,269,650
10 Day Avg. Volume915,783
30 Day Avg. Volume644,909
Financial Highlights & Ratios
PEG Ratio0.33
Price to Book (P/B)1.27
Price to Sales (P/S)0.00
P/FCF Ratio10.83
Enterprise Value/Market Cap2.65
Enterprise Value/Revenue0.21
Enterprise Value/Gross Profit3.66
Enterprise Value/Ebitda1.58
Forecast
1Y Price Target
$13.50Price Target Upside28.21% Upside
Rating ConsensusModerate 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. The balance sheet shows significant financial risks with zero stockholders' equity, while the income statement indicates reduced profitability. However, operational cash flows are robust, which provides some stability.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 |
| 225.90M | 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 | |||
| -81.40M | 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
10.53
Price Trends
12.03
Negative
13.19
Negative
15.11
Negative
Market Momentum
-0.33
Negative
38.58
Neutral
28.84
Neutral
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 10.53 is below the 20-day moving average (MA) of 11.33, below the 50-day MA of 12.03, and below the 200-day MA of 15.11, indicating a bearish trend. The MACD of -0.33 indicates Negative momentum. The RSI at 38.58 is Neutral, neither overbought nor oversold. The STOCH value of 28.84 is Neutral, 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 (50)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $644.89M | 15.50 | 20.07% | 1.28% | 8.24% | 4.69% | |
68 Neutral | $1.23B | 22.20 | 4.65% | 2.79% | -0.16% | 47.70% | |
67 Neutral | $755.79M | 7.85 | 11.87% | 5.17% | 10.42% | ― | |
65 Neutral | $857.02M | 17.67 | -1.64% | ― | 2.23% | -115.70% | |
60 Neutral | $592.52M | 23.10 | 5.55% | 0.79% | -2.31% | -69.16% | |
50 Neutral | $1.99B | -1.06 | -21.34% | 3.71% | 2.03% | -30.65% | |
49 Neutral | $1.54B | 50.05 | 4.66% | 9.71% | -0.68% | ― |
* Basic Materials Sector Average
Performance Comparison
OEC
Orion Engineered
10.53
-13.87
-56.84%
KRO
Kronos Worldwide
6.57
-7.18
-52.22%
ODC
Oil-Dri Of America
47.69
7.09
17.46%
SCL
Stepan Company
54.43
-29.47
-35.13%
CC
Chemours Company
10.30
-15.02
-59.32%
ECVT
Ecovyst
7.30
-1.99
-21.42%
Orion Engineered Earnings Call Summary
Earnings Call Date:May 07, 2025
(Q1-2025)
| % Change Since: -6.23%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Negative
The earnings call highlighted significant challenges, including unplanned plant outages and cost issues impacting the rubber segment, alongside cautious specialty demand. These challenges were somewhat offset by sequential improvements in plant operations, progress in China, and cost reduction measures. However, the lowlights weigh heavily, indicating significant operational hurdles.Q1-2025 Updates
Positive Updates
Improved Sequential Plant Operations
Orion reported improved sequential plant operations, which is expected to contribute favorably moving forward.
Specialty Segment Volume Growth
Specialty segment volumes improved by 3% sequentially, although they declined 2% year-over-year.
China Operational Improvements
Orion made good progress in resolving operational challenges at the new facility in China, expecting a positive EBITDA contribution swing.
Cost Reduction and Efficiency Measures
Headcount reduction measures completed in Q1 are expected to save $5 million to $6 million annually, with additional savings anticipated.
Free Cash Flow Guidance Reaffirmed
Despite lower EBITDA guidance, Orion reaffirmed its full-year free cash flow expectations.
Negative Updates
Unplanned Plant Outages
Multiple unplanned plant outages impacted productivity and absorption levels, masking at least $10 million of greater earnings power in Q1.
Rubber Segment Challenges
Rubber demand was off to a slow start, with volumes improving only 2% year-over-year, affected by elevated tire imports.
Downtime and Cost Issues
Unplanned downtime and related effects had a $13 million impact, primarily affecting the rubber segment.
Inventory Revaluation Impact
A negative inventory adjustment is expected in Q2 due to lower oil prices, impacting financial results.
Choppy Specialty Demand
Demand in the specialty segment was characterized as choppy, with cautiousness observed in certain downstream value chains.
Company Guidance
During the Orion First Quarter 2025 Earnings Results Conference Call, the company provided several key metrics and guidance for the year. The first quarter was challenging, with several unplanned plant outages impacting productivity and costs, masking $10 million of greater earnings potential. This resulted in an underlying earnings power of approximately $70 million for EBITDA. Despite these issues, Orion reaffirmed its free cash flow guidance for 2025, targeting an improvement of $100 million compared to 2024, with a forecasted range of $40 million to $70 million. The company reduced its 2025 capital expenditure expectations by $10 million, down to $150 million, and plans to focus on building cash and reducing debt. Orion expects benefits from tariffs on imported tires to materialize in the second half of 2025, potentially improving demand for local tire manufacturing. Additionally, the company highlighted improved operations in its South American and Asian regions, although challenges persist due to elevated tire imports impacting Western markets.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.