Why Chemtura (CHMT) Stock Is Down Today

NEW YORK (TheStreet) -- Shares of Chemtura Corp. (CHMT) have fallen -4.4% to $24.09 after it was reported late last night that the specialty chemicals company plans to sell its agrochemicals business to Platform Specialty Products Corp. for about $1 billion, sources told the Wall Street Journal.

The deal is expected to be announced today.

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TheStreet Ratings team rates CHEMTURA CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHEMTURA CORP (CHMT) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, poor profit margins and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Chemicals industry. The net income has significantly decreased by 205.0% when compared to the same quarter one year ago, falling from $20.00 million to -$21.00 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Chemicals industry and the overall market, CHEMTURA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $20.00 million or 81.30% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for CHEMTURA CORP is rather low; currently it is at 24.45%. Regardless of CHMT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CHMT's net profit margin of -3.86% significantly underperformed when compared to the industry average.
  • CHEMTURA CORP's earnings per share declined by 31.6% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CHEMTURA CORP swung to a loss, reporting -$0.23 versus $1.03 in the prior year. This year, the market expects an improvement in earnings ($1.25 versus -$0.23).
  • You can view the full analysis from the report here: CHMT Ratings Report

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