Caesarstone 2Q ’18 Flat, but Wall Street Cheers
By Emerson Schwartzkopf
Caesarstone Ltd.’s second-quarter financial performance this year isn’t as good as last year’s, but investors boosted the quartz-surface-manufacturer’s stock by 25% this morning.
The reason? The news wasn’t as bad as Wall Street financial analysts predicted. And a dividend announcement didn’t hurt, either.
The Menashe MP, Israel-based company reported an EPS of 43¢ (adjusted/diluted, based on several factors) for April through June this year. That’s below the 49¢ EPS reported for second-quarter 2017 … but above the 24¢-25¢ EPS anticipated by analysts following the company’s stock (NASDAQ:CSTE).
The better-than-expected EPS, plus a 15¢-per-share dividend payable in mid-September, brought a boom in Caesarstone’s stock this morning. The stock closed yesterday at $14.75 and spent most of the trading morning above $17, with peaks as high as $18.40.
The stock-value gains came in the face of a second-quarter 2018 financial report that showed the company’s results as static – at best – from the same time last year, although better than this year’s first quarter.
Caesarstone second-quarter revenue worldwide totaled $149.2 million this year, a minimal 0.2% rise from 2Q 2017’s $148.9 million. When currency fluctuations are taken into account, however, the company reported that 2018’s 2Q revenues are 1.5% less than last year’s.
The biggest revenue change came in the United States – Caesarstone’s largest market — where the $60.3 million for 2Q 2018 is 6.9% less than the same time in 2017; the company’s home-country market, Israel, saw a 15.9% decline. Strong gains in Canada and Europe helped offset the larger declines.
Caesarstone revenues worldwide for January-June this year came to $285.30 million, compared to $285.32 million for the first six months of 2017. U.S. first-half revenues of $117.1 million are 4.7% off 2017’s pace; again, losses here and in Israel are balanced by gains in Canada and Europe.
Caesarstone reported that 2Q 2018 saw “significant improvement in at our U.S. manufacturing facility” in Richmond Hill, Ga., although it also noted negative impacts from “increased product complexity and other manufacturing challenges in Israel along with inventory and logistics inefficiencies and higher raw material costs.”
The company also reported a $1.1 non-recurring expense in this year’s second quarter, which it attributed “mainly to relocation expenses” of moving Caesarstone USA headquarters from Van Nuys, Calif., to Charlotte, N.C.
“Our second quarter results show considerable operational improvement compared to our performance in the first quarter of 2018, highlighted by a significant increase in gross margin,” said Yair Averbuch, Caesarstone interim CEO. “At the same time, we recognize the need to better capitalize on the strong market opportunity for quartz, mainly in North America, and to continue improving our operations.
“In the second half of 2018, we are taking steps to leverage our global platform, powerful brand, leading products and financial strength to generate stronger returns. While manufacturing challenges in Israel, raw material cost inflation and currency exchange rates are likely to remain headwinds, we are improving our manufacturing operations and our U.S. sales and distribution capabilities to position the company for additional improvement opportunities in 2019.”
Caesarstone announced that new CEO Yuval Dagim will start on Aug. 12.
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