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Calgon Carbon (CCC) Faces End-Market, Forex Headwinds

On May 13, we issued an updated research report on Calgon Carbon CCC.

Calgon Carbon, which is among the prominent pollution control companies along with CECO Environmental Corp. CECE, saw its profits tumble roughly 50% year over year in the first quarter of 2016. It also witnessed lower sales in the quarter, hurt by a stronger U.S. dollar (versus euro and British pound).

Both revenues and earnings for the quarter missed Zacks Consensus Estimates. While the company sees market uncertainties to continue, it expects second-quarter results to be better compared with the first. The company is also working toward the completion of its proposed acquisition of CECA’s (a subsidiary of the Arkema Group) activated carbon and filter aid business in fourth-quarter 2016.

While Calgon Carbon should gain from its aggressive cost-reduction actions, capacity expansion and contract wins, it remains exposed to certain headwinds including challenges in the mercury removal market.

Calgon Carbon continues to witness a challenging global economic environment, affecting sales in certain areas of its industrial end markets. Demand for activated carbon remains weak in specific markets, including specialty carbon. Powdered activated carbon sales for treating mercury emissions are expected remain under pressure in the near term.

Calgon Carbon’s Equipment division also continues to see lower sales of ballast water treatment systems. Moreover, delay in several North American municipal water carbon exchange projects (that have been shifted from the first quarter to late 2016) may continue to affect the company’s top line.

In addition, currency remains a headwind for the company. Unfavorable currency translation had a $1.1 million negative impact on its top line in the first quarter. Currency is expected to continue to impact sales in the second quarter, albeit to a lesser extent than what was witnessed in the first.

Calgon Carbon carries a Zacks Rank #5 (Strong Sell).

Stocks to Consider

Better-ranked companies in the pollution control space are Landauer Inc. LDR and Donaldson Company, Inc. DCI. While Landauer sports a Zacks Rank #1 (Strong Buy), Donaldson is a Zacks Rank #2 (Buy) stock.

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CALGON CARBON (CCC): Free Stock Analysis Report
 
DONALDSON CO (DCI): Free Stock Analysis Report
 
CECO ENVIRNMNTL (CECE): Free Stock Analysis Report
 
LANDAUER INC (LDR): Free Stock Analysis Report
 
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