Why GrafTech International (GTI) Stock Is Plummeting in After-Hours Trading Today

NEW YORK (TheStreet) -- Shares of GrafTech International  (GTI) plummeted 21.7% to $5.52 in after-hours trading Tuesday after the company updated its 2014 guidance.

The graphite company reduced its EBITDA target to a range of $105 million to $115 million from a range of $135 million to $150 million. GrafTech now expects operating cash flow of $95 million to $110 million, down from $125 million to $140 million.

The company forecasts working capital reduction of approximately $70 million, down from $90 million. GrafTech also decreased its capital expenditures guidance to a range of $80 million to $90 million from a range of $85 million to $95 million.

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GrafTech announced some executive changes. Darrell Blair, Vice President of Global Sales for the graphite electrode business, will become President of the Industrial Materials segment. Dr. Pieter Barnard, the current President of the Industrial Materials segment, will retire effective November 1 after a 42-year career.

Dr. Julian Norley, Vice President of Corporate Research and Development, will lead the new Technology and Innovation Center. Finally, Hermanus Pretorius, President of GrafTech's Seadrift Coke subsidiary, will also retire effective November 1.

Separately, TheStreet Ratings team rates GRAFTECH INTERNATIONAL LTD as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate GRAFTECH INTERNATIONAL LTD (GTI) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."

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

  • The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.06, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly increased by 632.18% to $33.81 million when compared to the same quarter last year. In addition, GRAFTECH INTERNATIONAL LTD has also vastly surpassed the industry average cash flow growth rate of 3.11%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.5%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Electrical Equipment industry and the overall market, GRAFTECH INTERNATIONAL LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for GRAFTECH INTERNATIONAL LTD is rather low; currently it is at 21.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -54.69% is significantly below that of the industry average.
  • You can view the full analysis from the report here: GTI Ratings Report

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