How Does Kronos Stock Look After Its 15% Rise Last Week?

Kronos Worldwide (NYSE: KRO), a titanium dioxide pigments (TiO2) producer and marketer, has gained around 15% in a week, considerably outperforming the broader Russell 2000 index which remains down by 0.2% over the same period. So what’s driving the recent surge in the stock? Kronos recently announced its Q4’23 results that were above the street estimates. It reported sales of $400 million, up 17% y-o-y, and an adjusted loss of $0.05 per share (versus a loss of $0.18 per share in the prior-year quarter) compared to the consensus estimates of $379 million and $(0.14), respectively. The sales growth was primarily led by a 29% rise in sales volume, partly offset by an 11% fall in average pricing. The production volume was also up 15% in Q4’23.

TiO2 applications, include products, such as paints, inks, coatings, plastics and paper, as well as many specialty products such as cosmetics and pharmaceuticals. The pickup in demand in Europe and North America lately is positive for the company, and its sales are expected to surge around 25% to $2.1 billion in 2024. The company has a strong financial stability, with its cash as a percentage of assets of 17.5% and a debt to equity ratio of 35.8%.

Looking at stock performance, KRO has suffered a sharp decline of 35% from levels of $15 in early January 2021 to around $10 now, vs. an increase of about 35% for the S&P 500 over this roughly three-year period. Notably, KRO stock has underperformed the broader market in each of the last 3 years. Returns for the stock were 1% in 2021, -37% in 2022, and 6% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that KRO underperformed the S&P in 2021, 2022, and 2023.

In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Materials sector including LIN, SHW, and RIO, and even for the megacap stars GOOG, TSLA, and MSFT.
In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment with elevated interest rates, should you buy or fear KRO stock at the current market price of about $10 per share? While there are some tailwinds for the stock, we think Kronos’ valuation at the current juncture appears to have little room for growth. KRO stock trades at about 0.6x forward sales, close to the 0.7x average over the last three years. KRO stock is also somewhat more vulnerable to downturns, as the stock has seen bigger corrections compared to the broader market over both the 2008 recession and the 2020 Covid-19 recession. See our analysis on Buy Or Fear Kronos Worldwide (KRO) Stock? for more details about what is driving the stock.

While KRO stock looks like it has little room for growth, it is helpful to see how Kronos’ peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 3/11/2024
[2] Cumulative total returns since the end of 2016

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