Key Highlights

  • Consensus EPS of 0.73 compares with second-quarter GAAP diluted EPS of 1.00 and adjusted diluted EPS of 1.18.
  • Consensus revenue of USD 634.30 million compares with second-quarter net sales of USD 684,109 thousand, against USD 594,689 thousand.
  • Adjusted EBITDA was USD 74.4 million, up 45%, with organic sales volume growth of 6%.
  • Management cited a USD 5 million to USD 10 million pull-forward of EBITDA from the third quarter into the second.

Stepan (NYSE:SCL) reports third-quarter results on Wednesday, Oct. 28, before the market opens. Consensus stands at EPS of 0.73 on revenue of USD 634.30 million, and the company has a market capitalization of USD 1.47 billion.

Stepan makes surfactants, polymers and specialty products used in cleaning, building and food applications. Second-quarter net sales were USD 684,109 thousand against USD 594,689 thousand, and net income was USD 22,911 thousand against USD 11,341 thousand.

Estimates Against Second-Quarter Results

The EPS estimate of 0.73 is below the second-quarter GAAP diluted EPS of 1.00, which compared with 0.50 a year earlier, and below adjusted diluted EPS of 1.18. The estimates table does not state its EPS basis. The revenue estimate of USD 634.30 million is below the USD 684,109 thousand reported.

Adjusted net income was USD 27.1 million against USD 12.0 million. Net sales rose 15%, reflecting higher selling prices, volume growth and favorable currency translation.

What Management Guided and What It Left Open

Management put full-year restructuring charges at USD 75 million to USD 80 million and said Project Catalyst is targeting USD 60 million of pretax savings in 2026 within a USD 100 million two-year program. It plans to reduce 100 salaried positions during the third quarter.

Management estimated that prebuying pulled USD 5 million to USD 10 million of EBITDA forward from the third quarter, citing geopolitical uncertainty. It gave no third-quarter earnings range, and free cash flow was negative USD 15 million.

Segment Earnings and Volume

Surfactant adjusted EBITDA was USD 54.9 million, up 59%, with organic volume up 7%. Polymer adjusted EBITDA was USD 31.2 million, up 22%, with sales volume up 5%, and Specialty Products adjusted EBITDA was USD 6.5 million, down 3% on product mix.

Gross profit was USD 99,982 thousand against USD 71,885 thousand, and operating income was USD 37,210 thousand against USD 17,965 thousand. Income before income taxes was USD 32,549 thousand against USD 13,786 thousand.

Leverage, Cash Flow and Capital Spending

Net leverage was 2.5 times against 2.7 times at the end of the first quarter. Working capital built by USD 58 million on higher raw material costs, and cash flow from operations was USD 56 million before working capital changes.

Capital expenditures were USD 23 million and dividends were USD 9 million. Pasadena facility utilization was 75% to 80%, and spray foam volume tripled. Adjusted corporate expenses were USD 18.0 million, up 17% on incentive-based compensation, and the company added 500 new product-customer combinations in the first half. It extended its streak to a 58th consecutive year of dividend increases. The estimates table lists a market capitalization of USD 1.47 billion.

Figures to Follow in the Release

Reported EPS against 0.73 and net sales against USD 634.30 million are the headline comparisons. Other markers are the prebuying pull-forward, Surfactant volumes and restructuring charges.