Q2 Financial Results Crush Forterra Inc (NASDAQ:FRTA) Stock

Forterra Inc (NASDAQ:FRTA)

Forterra Inc (NASDAQ:FRTA) stock lost over 57% in today’s trading after the company’s Q2 2017 financial results underperformed expectations. Forterra stock ended yesterday at $8.27, then gapped down to open at $6.08 before hitting an inter-day low of $3.50 which is only a penny below the stock’s closing price of $3.51. The volume was eight times the 30-day, daily average. Forterra’s stock price:

Forterra Inc (NASDAQ:FRTA)
One month stock price chart for FRTA

Forterra Business and Q2 Financials

Forterra Inc (NASDAQ:FRTA) manufactures water and drainage pipe and products in the U.S. and Eastern Canada for water-related infrastructure applications including water distribution, drainage, and stormwater management. Irving, TX-based Forterra Inc (NASDAQ:FRTA) has a product breadth and scaling ability that allow it to service all sizes of infrastructure products without the need for external suppliers.

Q2 2017 net sales increased to $436.7 million, versus $381.7 million for the same quarter of 2016. The increase was heavily driven by acquisitions which contributed $56.1 million. Net sales were negatively impacted by Tropical Storm Cindy, excessive rainfall events around the country and a decline in average sales prices of products sold.  Net income for the quarter was (-$11.2) million, or (-$0.18) per share, compared to net income of $36.7 million, or $0.70 per share, in the prior year quarter.  Adjusted net income1 was (-$1.3) million for Q2 2017 compared to adjusted net income1 of $43.4 million in the prior year quarter.  Adjusted EBITDA1 for the second quarter was $46.5 million, lower than $50 – $60 million guidance provided in Q1, compared to $74.0 million in the prior year quarter.

Forterra Inc (NASDAQ:FRTA) is guiding expectations lower for the remainder of 2017. The company is also reassessing the timetable expectations to achieve a 400 basis point increase in income from operations, EBITDA and adjusted EBITDA as a percentage of sales as compared to full-year 2016.

Forterra Stock Price Analysis

Forterra stock hit $3.50, demolishing the old 52-week low of $6.01. Prior to today’s price action, Forterra stock was down over 83% YTD. At the end of 2016, Forterra stock was trading above $22.00. On a more positive note, the stock’s Relative Strength Index stands well below 20 at 17.25, and observers believe the figure represents an “oversold” condition for shares of Forterra Inc (NASDAQ:FRTA).

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: James Marion is a University of Houston student studying Business with a concentration in Finance. James has interned with several investment professionals and hopes to pursue a career as a professional stock analyst after graduation.

Drop Continues for Shares of Forterra Inc (NASDAQ:FRTA)

Forterra Inc (NASDAQ:FRTA)

Shares of Forterra Inc (NASDAQ:FRTA) continue to find new lows as shares dropped over 15% in today’s trading. Ten days ago, FRTA shares were flirting with the $20 level and today shares ended on their session lows at $8.91. Volumes were heavy. Over 2.68 million shares traded hands on a stock that has a 30-day, daily volume average of just 399,000.

Forterra Inc (NASDAQ:FRTA)’s slide started on May 16 when their earnings report sent investors seeking cover if not an outright exit. The company posted a (-$0.31) Q1 EPS loss. However the news that sent shareholders into a panic was the adjusted EBITDA guidance of $50 – $60 million which was well below the $89 million figure that the street was expecting. Unfortunately, Forterra Inc (NASDAQ:FRTA) suggested that Q2 figures would also disappoint. The company referenced project delays and competitive pressures. Additionally higher expenses of raw materials and labor were quoted as conditions that Forterra does not see subsiding. As of March 31, 2017 Forterra Inc (NASDAQ:FRTA) had cash on hand amounting to $27.5 million. That cash comes from a $1.26 billion loan of which only $68.1 million is available.

CEO Jeff Bradley commented that while the company is going through some short-term pain, he remains optimistic about Forterra’s long-term strength. However he optimistically included his view that the second half of 2017 should be in line with their previous expectations. He attributed his optimism to acquisitions that Forterra made in 2016 and 2017.

Following the May earnings release, SunTrust, RBC Capital Markets, and CitiGroup all downgraded FRTA shares to “Neutral”. FRTA’s Relative Strength Index (RSI) now sits at 12.43. Traders normally believe that a figure below 20 is usually a sign of an “oversold” condition.

The May earnings release of their Q1 2017 figures has spawned several law firms alleging securities violations. Class action lawsuits appear to be in the process of being filed, and clients being sought.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: James Marion is a University of Houston student studying Business with a concentration in Finance