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
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