PITTSBURGH -- Shares Calgon Carbon Corp. fell sharply in Friday trading after the company, which makes water and air filtration systems, said it expects to report a third-quarter net loss.
THE SPARK: After the market closed on Thursday, the Pittsburgh company said delayed deliveries, lower production and the closure of a factory in China led it to expect third-quarter sales to fall 5 percent to approximately $137 million. That was below the $145 million analysts had been expecting.
Calgon Carbon is scheduled to report its third-quarter results on Nov. 2. Analysts now expect earnings of 13 cents per share, down from 29 cents per share in the same quarter a year ago.
THE BIG PICTURE: Calgon said sales slumped because of a reduced use of activated carbon in the mercury removal market and delays in deliveries to municipalities and wastewater treatment facilities. The company said its Pearl River plant in Mississippi also didn't operate for much of the third quarter because of maintenance, a capital improvement project and damage caused by Hurricane Isaac.
President and CEO Randy Dearth said severance payments from an ongoing cost reduction plan and a financial agreement reached with the company's former CEO, John Stanik, also contributed to the company's losses. Stanik retired in July.
THE ANALYSIS: Michael Gaugler and Christopher Noon of Brean Capital called the problems the company identified "a litany of one-time issues." They kept a "Buy" rating on the stock, but lowered their price target to $16 from $18, maintaining that "investors will not pay anywhere near a premium multiple short term due to onetime issues that have become habitual."
Wedbush analyst David Rose said that ongoing restructuring costs were expected, but the revenue shortfall "is a bit disconcerting." Recent discussions with the new CEO also suggest that there will be additional phases of cost reductions in coming quarters, he said. Rose kept a "Hold" rating on the stock with a $14 price target.
SHARE ACTION: Calgon Carbonshares fell $1.02, or 7.3 percent, to end the week at $12.96. The stock has traded between $12.54 and $17.25 in the past 52 weeks, and is down 17.5 percent since the start of the year.