Earnings call transcript: NewMarket Q4 2024 beats expectations, stock surges

NewMarket Corporation, with a market capitalization of $4.79 billion, reported strong financial results for the fourth quarter of 2024, surpassing earnings expectations and driving a notable increase in its stock price. The company recorded earnings per share (EPS) of $11.56, significantly higher than the same period last year, and saw its revenue reach $654.6 million. Following the announcement, NewMarket’s stock price rose by 3.77%, closing at $502.97. According to InvestingPro analysis, the stock is currently trading near its 52-week low, suggesting potential value opportunity for investors.

Key Takeaways

• NewMarket’s Q4 2024 EPS of $11.56 exceeded market expectations.
• The company’s stock price increased by 3.77% in after-hours trading.
• Petroleum Additives sales experienced a slight decline, but overall profitability improved.
• The acquisition of American Pacific Corporation bolstered NewMarket’s portfolio.
• Operational efficiencies led to reduced costs and improved debt ratios.

Company Performance

NewMarket demonstrated robust performance in Q4 2024, with net income rising to $111 million from $80 million in the same quarter of 2023. The company’s financial strength is evident in its impressive 37% return on equity and healthy 2.83 current ratio. Despite a decrease in Petroleum Additives sales, the company achieved higher profitability through operational improvements and strategic acquisitions. The acquisition of American Pacific Corporation played a crucial role in enhancing NewMarket’s capabilities in performance additives for space and defense sectors. InvestingPro subscribers can access detailed financial health metrics and 8 additional ProTips that provide deeper insights into NewMarket’s performance.

Financial Highlights

• Revenue: $654.6 million in Q4 2024
• Earnings per share: $11.56, up from $8.38 in Q4 2023
• Full Year Net Income: $462 million, up from $389 million in 2023
• Petroleum Additives Sales: $626 million, down from $642 million in Q4 2023

Earnings vs. Forecast

NewMarket’s Q4 EPS of $11.56 outperformed market forecasts, contributing to a positive market reaction. The company’s ability to exceed expectations was driven by improved operational efficiencies and strategic acquisitions, which offset the challenges posed by a slight decline in Petroleum Additives sales.

Market Reaction

Following the earnings announcement, NewMarket’s stock price increased by 3.77%, reflecting investor confidence in the company’s performance and future prospects. The stock’s rise to $502.97 brought it closer to its 52-week high of $650, indicating strong market sentiment despite a challenging economic environment.

Outlook & Guidance

Looking ahead, NewMarket anticipates continued strength in its Petroleum Additives and Specialty Materials segments. The company remains focused on long-term shareholder value through a safety-first culture, customer-focused solutions, and technology-driven products. This commitment to shareholder value is reflected in the company’s 6-year streak of dividend increases and an attractive 2.06% dividend yield. Strategic initiatives, including the integration of American Pacific Corporation, are expected to support future growth. InvestingPro’s comprehensive research report provides detailed analysis of NewMarket’s growth prospects and financial outlook, available along with 1,400+ other top US stocks.

Executive Commentary

Tim Fitzgerald, NewMarket’s executive, expressed satisfaction with the company’s performance, stating, "We are very pleased with the performance of our Petroleum Additives business during 2024." He emphasized the company’s commitment to technology investments, saying, "We continue to focus on investing in technology to meet customer needs." Fitzgerald also highlighted NewMarket’s dedication to shareholder value: "We are committed to making decisions that promote long-term value for our shareholders and customers."

Risks and Challenges

• Inflationary pressures may impact cost structures and profitability.
• Declines in fuel additives sales could affect overall revenue.
• Integration challenges with American Pacific Corporation could arise.
• Market volatility may affect stock performance.
• Supply chain disruptions could impact operations.

The company’s strong Q4 performance and strategic initiatives position it well for future growth, despite the potential risks and challenges in the broader market environment.

Full transcript - NewMarket Corp (NYSE:NEU) Q4 2024:

Matthew, Conference Call Moderator: Good day, everyone, and welcome to the Newmarket Corporation Schedules Conference Call and Webcast to review the 4th Quarter 2024 Financial Results. At this time, all participants have been placed on a listen only mode. It is now my pleasure to turn the floor over to your host, Tim Fitzgerald. Sir, the floor is yours.

Tim Fitzgerald, Executive (likely CFO or CEO), Newmarket Corporation: Thank you, Matthew, and thanks to everyone for joining me this afternoon. As a reminder, some of the statements made during this conference call may be forward looking. Relevant factors that could cause actual results to differ materially from those forward looking statements are contained in our earnings release and in our SEC filings, including our most recent Form 10 ks. During this call, we will also discuss the non GAAP financial measures included in our earnings release. The earnings release, which can be found on our website, includes a reconciliation of the non GAAP financial measures to the comparable GAAP financial measures.

We intend to file our 2024 10 ks in the middle of February. It will contain significantly more details on the operations and performance of our company. Today, I will be referring to the data that was included in last night’s release. Net income for the Q4 of 2024 was $111,000,000 or $11.56 per share compared to net income of $80,000,000 or $8.38 per share for the Q4 of 2023. Net income for the full year 2024 was $462,000,000 or $48.22 per share compared to net income of $389,000,000 or $40.44 per share for 2023.

Petroleum additive sales for the Q4 of 2024 were $626,000,000 compared to $642,000,000 for the same period in 2023. Petroleum additives operating profit for the Q4 of 2024 was $136,000,000 compared to $110,000,000 for the Q4 of 2023. The increase in operating profit was mainly due to lower operating costs. We continue to focus on operational efficiency, while still making investments in technology to support our customers. These gains were partially offset by a decrease in shipments as customers managed year end inventory levels.

For the full year 2024, sales for the Petroleum Additives segment were $2,600,000,000 compared to $2,700,000,000 in 2023. Petroleum Additives operating profit for 2024 was $592,000,000 compared to $514,000,000 for 2023. The increase in operating profit was a result of lower operating costs driven by our efficiency efforts as well as lower raw material costs offset by lower selling prices. Shipments were flat when comparing 2024 to 2023 with a small increase in lubricant additives offset by a decline in fuel additives. We are very pleased with the performance of our Petroleum Additives business during 2024 and the work done by our team to achieve 4 quarters of strong operating profit.

However, we remain challenged by the ongoing inflationary environment despite our efforts to improve efficiency and manage our operating costs. We continue to focus on investing in technology to meet customer needs, optimizing our inventory levels and improving our portfolio profitability. On January 16, 2024, we completed the acquisition of American Pacific Corporation. AMPAC is the leading North American manufacturer of critical performance additives used in solid rocket motors for space launch and military defense applications. We report the financial results of our AMPAC business in our Specialty Materials segment.

Specialty Materials sales were $27,000,000 for the Q4 of 2024 $141,000,000 for the full year, surpassing our pre acquisition expectations. Specialty Materials operating profit was 1,500,000 dollars for the Q4 of 2024 $17,500,000 for the full year. The Specialty Materials full year results include the sale of AMPACT finished goods inventory that we acquired at closing and it was recorded at fair value and sold during the year at no margin. We generated solid cash flows throughout the year and made payments of $373,000,000 on our revolving credit facility since the AMPAC acquisition. We returned $128,000,000 to our shareholders through dividends of $96,000,000 and share repurchases of $32,000,000 As of December 31, 2024, our net debt to EBITDA ratio was 1.2, which was a significant improvement over the 1.9 times we reported the end of Q1.

As we look ahead to 2025 and beyond, we anticipate continued strength in our Petroleum Additives and Specialty Materials segments. We are committed to making decisions that promote long term value for our shareholders and customers, while staying focused on our long term objectives. We believe that the core principles guiding our business, a long term perspective, a safety first culture, customer focused solutions, technology driven products and a world class supply chain will continue to benefit all our stakeholders. Matthew, that concludes our planned comments. We are available for questions via email or by phone, so please feel free to contact me directly.

Thank you all again, and we will talk to you next quarter.

Matthew, Conference Call Moderator: Thank you. Everyone, this concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

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