Why Hawkins Stock Crushed the Market on Tuesday
Key Points
It posted very encouraging quarterly results after market close Monday.
All three of its reporting units delivered revenue increases.
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The global chemical industry might be in a prolonged slump, but it seems no one bothered to tell Hawkins.
The diversified chemical company posted a growth-packed quarterly earnings report that convincingly beat analysts. Obviously pleased by this, investors bid the company's stock up by almost 14% on Tuesday, trouncing the 0.6% gain of the benchmark S&P 500 index.
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Downcycle? What downcycle?
Hawkins notched a new record for revenue in its second quarter of fiscal 2027. This was just under $314 million, for a robust year-over-year increase of 12%. Its growth was broad, with all three reporting segments -- water treatment, industrial solutions, and food and health sciences -- delivering improvements. Water treatment saw an increase of 16%, followed by 10% for industrial solutions and 5% for food and health sciences.
Image source: Getty Images.
Hawkins notched another second-quarter record with headline earnings per share (EPS). Its net income was just under $27.8 million, for EPS of $1.34, representing growth of nearly 23%.
Compounding the all-time highs, both fundamentals topped the consensus analyst estimates. Collectively, prognosticators following Hawkins were estimating less than $303 million on the top line, and EPS of only $1.19.
Higher volumes helped boost revenue across all three business units, aided in some instances by price hikes. On a slightly down note, food and health sciences was dinged by a sales slump in agricultural products.
A unique operator
What's probably more encouraging about Hawkins' performance during the industry slump is its shareholder-pleasing moves and its balance-sheet cleanup. The company didn't hesitate to mention that it retired $15 million of debt and repurchased $12 million of its own stock during the quarter.
Market players notice when a company can buck a trend and do well while peers struggle. Hawkins has a unique mix of businesses that are clearly resistant to the stiff headwinds buffeting the chemical industry, and it has a habit of bulking up with bolt-on acquisitions. Tuesday's pop makes it a bit pricey on valuations, however, so I'd keep an eye on the company's organic growth to judge how its legacy business is performing.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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