Stepan Co. (SCL) Tops Q4 EPS by 21c, Revenues Miss

Stepan Co. (NYSE: SCL) reported Q4 EPS of $1.02, $0.21 better than the analyst estimate of $0.81. Revenue for the quarter came in at $466.66 million versus the consensus estimate of $486.67 million.

• Reported net income was $26.9 million, or $1.16 per diluted share versus $9.9 million, or $0.42 per diluted share, in the prior year. Adjusted net income was $23.7 million, or $1.02 per diluted share versus $24.6 million, or $1.06 per diluted share, in the prior year.* Prior year adjusted net income excludes a $14.9 million net after-tax charge related to the 2017 U.S. Tax Cuts and Jobs Act legislation.
• Surfactant operating income was $31.8 million versus $28.8 million in the prior year. This increase was primarily attributable to improved product mix and lower manufacturing costs in North America. The Company's first quarter 2018 acquisition in Ecatepec, Mexico delivered $0.8 million of operating income in the quarter. Global Surfactant sales volume increased 2% versus the prior year.
• Polymer operating income was $10.8 million versus $19.1 million in the prior year. This decrease was mostly attributable to margin pressures, lower European volume and higher expense associated with the Company's Phthalic Anhydride maintenance turnaround. Global Polymer sales volume was down 4% versus the prior year.
• Specialty Product operating income was $5.1 million versus $2.3 million in the prior year. This increase was primarily due to higher volume and improved margins in our food business and favorable order timing differences within our pharmaceutical business.

"The Company delivered record results in 2018 driven by record Surfactant earnings and a lower 2018 effective tax rate," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer. "The quarterly and annual Surfactant growth reflect higher sales volume, the accretive impact of our 2018 Mexico acquisition, improved North American product mix and lower manufacturing costs. The Polymer business was down versus the prior year due to continued margin challenges and the lost share for polyisocyanurate in the European insulation market, which is still growing due to energy conservation efforts. Our Specialty Product business results improved for both the quarter and full year."

Outlook

"After record results in each of the past three years, we believe our Surfactant business will continue to benefit from our diversification efforts into functional products, new technologies, improved internal efficiencies and expanded sales into our broad customer base globally. We believe our Polymer business will benefit from the growing market for insulation materials and we are optimistic the business will deliver both full year volume growth and incremental margin improvement versus 2018. Specialty Products should also improve," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer.

For earnings history and earnings-related data on Stepan Co. (SCL) click here.

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