4Q16 adjusted EPS
Axalta Coating Systems (AXTA) reported adjusted EPS (earnings per share) of $0.29 for 4Q16 and managed to meet analysts’ expectation of $0.29. EPS rose a whopping 81.3% year-over-year compared to $0.16 in 4Q15.
The rise in Axalta’s adjusted EPS was driven by higher income from higher revenue and a reduction in interest expense from $46.5 million in 4Q15 to 37.4 million in 4Q16. The company accomplished this through refinancing its debt and the early payment of a $150.0 million term loan.
Adjusted EPS excludes charges related to productivity initiatives, the write-down of assets in Venezuela, and the refinancing of term loans.
Axalta has guided its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for fiscal 2017 at $930.0 million–$980.0 million. That’s a rise of 3.0%–8.0% compared to fiscal 2016.
The company expects its free cash flow to be $440.0 million–$480.0 million in fiscal 2017. Free cash flow could be used for an early retirement of debt and reduced interest expenses, which it estimates at $150.0 million in fiscal 2017 compared to $178.2 million in fiscal 2016. The company’s fiscal 2017 earnings guidance appears to be positive, which could lead to a value addition for shareholders.
You can indirectly hold Axalta by investing in the iShares US Basic Materials (IYM), which has invested 1.0% of its portfolio in Axalta as of February 8, 2017. The top holdings of IYM are Dow Chemical (DOW), DuPont (DD), and Monsanto (MON), with weights of 10.9%, 10.7%, and 7.7%, respectively.
In the next part, we’ll see how Axalta’s Performance Coatings segment did in 4Q16.