Compass Minerals Turns Winter Into Cold, Hard Cash for Dividend Investors

By Markets Fool.com


Source: Compass Minerals.

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For many businesses, a harsh winter is the kiss of death, as weather-weary consumers steer clear of shopping trips because of blizzards and dangerous travel conditions. But for Compass Minerals International , which makes the salt that many state and local governments use to help keep their roads ice-free, early snows helped bring record-setting results during the company's fourth quarter. As a result, Compass Minerals boosted its dividend 10%, and investors can expect even more from the company in 2015. Let's take a closer look at Compass Minerals and how it celebrated a cold winter last quarter.

Let it snow, let it snow, let it snow

For the quarter, Compass Minerals had extremely strong results. Total sales rose by 12% to $433.4 million, which crushed the $396 million that most investors had expected to see from the company. On the bottom line, Compass Minerals also hit it out of the park, as net income of $80.5 million was up 38% from year-ago levels and equated to $2.38 in earnings per share, fully $0.40 per share higher than the consensus among those following the stock.

Salt mine. Source: Compass Minerals.

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Looking more closely at Compass Minerals' different businesses, the salt segment enjoyed revenue gains of 10% to $355.3 million, with the company showing its pricing power by lifting prices for its highway deicing products by a whopping 26%. As a result, even though volumes of salt sold fell by more than 10%, the overall impact on revenue was positive, with operating margins soaring six percentage points to 29%. The company estimated that winter weather added between $35 million and $40 million to sales and between $10 million and $15 million to operating earnings. Operating earnings represented a fourth-quarter record for Compass Minerals, showing the importance of the season on its results.

What might come as an even bigger surprise for investors is that Compass Minerals other major segment had even better results. Compass Minerals' plant nutrition segment includes sales of sulfate of potash, which is used to create specialty fertilizers for growing everything from vegetables to tobacco, and sales climbed 23% to $75.8 million. Here too, pricing power was key, as more favorable commodity prices lifted selling prices for Compass products by 15%, and volume increases of 7% added to the gains. Overall, revenue was a quarterly record for Compass Minerals in the segment.

CEO Fran Malecha didn't hesitate to tout the results. "Early snow and robust pre-season demand overcame mild December weather to product strong fourth-quarter results for our salt business," Malecha said, "while our plant nutrition business continues to reap the benefits of our value-driven market strategy." Malecha believes that the combination of weather and internal expansion should leave the company well-positioned for 2015.

Compass Minerals shows shareholders the money

As tangible proof of its success, Compass Minerals announced it would increase its dividend by 10%, making its quarterly payout $0.66 per share. That will leave the company's dividend yield just shy of the 3% mark, and it also marks the 12th straight year that Compass Minerals has boosted the amount it pays to shareholders in dividends.


Source: Compass Minerals.

Yet 2015 is starting out on an even better footing for Compass Minerals. Already, harsh winter weather in the Great Lakes region has offset milder weather elsewhere, and lower fuel costs will also make it easier for Compass Minerals to keep its overhead expenses low. The company expects sales of 12 million to 13 million tons of salt at an average price of $74 to $78, and total fertilizer volume of 390,000 to 420,000 tons at an average of $750 to $780 per ton would equate to $1.18 billion to $1.34 billion. It also gave earnings guidance of $5.10 to $5.60 per share. Admittedly, that guidance was a bit lower than the $1.30 billion and $5.63 per share that investors were already expecting, but it also incorporates fairly conservative views on what the rest of the year will bring.

Shareholders of Compass Minerals didn't hesitate to celebrate, sending shares up nearly 8% in the first half-hour of after-hours trading following the announcement. Investors looking for a silver lining from a harsh winter will want to keep their eyes on the salt-seller to see if it can rack up even better results than it expects this quarter and beyond.

The article Compass Minerals Turns Winter Into Cold, Hard Cash for Dividend Investors originally appeared on Fool.com.

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