Thursday, January 9, 2020

Innospec Leveraging New Growth Opportunities And Driving Margin Leverage

While I liked Innospec (IOSP) back in May, I never got the dip into the $70’s that I was hoping for, as the company has done a very good job of executing on some emerging growth opportunities in Fuel Specialties, as well as its long-term plan within Oilfield Services. Even the execution in Performance has been commendable, as the loss of volume to a significant customer and some adverse mix-shift has been offset by surprisingly resilient gross margins.

My biggest concern for Innospec going into 2020 is the risk that weak U.S. onshore drilling and fracking activity could sap the momentum in the Oilfield business. While Fuel Spec likely won’t see the same sort of volume growth it has in recent quarters, the longer-term opportunity in low-sulfur marine fuel (under IMO 2020) looks appealing. Valuation for this almost-uncovered specialty chemical company isn’t ideal, but management has shown the virtues of its diversified business model and it will likely take some weak quarters to open a window of opportunity.

Continue here:
Innospec Leveraging New Growth Opportunities And Driving Margin Leverage

No comments: