Here's Why Chemours Tumbled 41.4% in May
What happened
Shares of The Chemours Company (NYSE: CC) fell more than 41% last month, according to data from S&P Global Market Intelligence. The business reported disappointing first-quarter 2019 operating results. While management stated that the performance was in-line with expectations for a slow start to the year, Wall Street analysts were concerned with the number of headwinds.
All three of the company's business segments reported a year-over-year revenue decline, highlighted by a 35% drop from the titanium technologies portfolio. Chemours also noted that its Opteon refrigerants business is facing pressure in Europe, while an important new manufacturing facility encountered delays during ramp-up.
So what
Chemours reported a troubling pattern in the first three months of 2019 in which revenue fell and expenses increased. That sapped operating income from two directions and led to an awful year-over-year comparison for the most important financial metrics.
If there's a silver lining for the business, then it stems from the fact that ramp-up delays from the new Opteon manufacturing facility in Texas should be short-lived. It's not unusual for large, complex chemical manufacturing facilities to encounter unique obstacles during start-up and ramp-up activities. Moreover, management is confident the facility can jump back on track in the coming quarters. That'll be important, because the U.S.-based facility is expected to significantly lower costs compared to production in Asia.
Now what
Chemours had a rough start to 2019, and although some of the headwinds could prove temporary, investors cannot overlook the company's toxic legacy stemming from its fluoroproducts division. That legacy could still prove costly, too. The quarterly report filed with the SEC disclosed multiple new lawsuits and complaints brought in the first quarter alone, including towns such as Atlantic City and the Cannon Air Force Base in New Mexico. Therefore, a tumbling share price might not be as tempting as investors initially think.
10 stocks we like better than ChemoursWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Chemours wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of March 1, 2019
Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.