Be The Investor ResearchAxalta Misses Q3 Estimates as Performance Coatings Margins Slide
Axalta missed third-quarter earnings and revenue expectations, lowered its full-year adjusted EPS outlook to about $2.45 and guided to flat fourth-quarter sales. Mobility grew, but Performance Coatings margins contracted sharply.
Axalta's third-quarter shortfall was not simply a modest earnings miss. Weaker Performance Coatings volumes, higher costs and merger expenses narrowed profitability just as the company prepares for its proposed combination with AkzoNobel.
Adjusted earnings were $0.63 a share, $0.07 below the $0.70 consensus. Revenue was about $1.31 billion, below the $1.33 billion estimate but 2% higher than a year earlier. On a reported basis, Axalta earned $0.44 a diluted share and $95 million of net income, according to the company's release.
The segment split explains the pressure. Performance Coatings sales fell to $818 million from $828 million as lower European refinish volumes outweighed currency and acquisition benefits. Adjusted EBITDA dropped to $188 million from $211 million, and margin contracted to 23.0% from 25.5%.
Mobility Coatings moved the other way. Sales reached a quarterly record of $493 million, up 7%, while commercial-vehicle sales rose 24% to $119 million. Segment adjusted EBITDA was $94 million and margin expanded 100 basis points to 19.0%.
Company-wide adjusted EBITDA declined 4% to $282 million, with margin falling to 21.5% from 22.8%. Operating cash flow was $135 million. Free cash flow increased 3% to $92 million, even after about $21 million of merger-related cash costs. Net leverage fell to 2.1 times, the lowest level Axalta reported in its history.
The outlook weakened. Axalta expects roughly flat fourth-quarter sales, adjusted EBITDA of $254 million to $264 million and adjusted EPS near $0.55, below the cited $0.65 consensus. Full-year adjusted EPS is now expected near $2.45, versus a $2.62 estimate, while free cash flow guidance of about $450 million includes roughly $80 million of merger and acquisition cash costs.
The quarter leaves a clear divide. Mobility demand and deleveraging are strengths, but Performance Coatings margin pressure and reduced guidance limit near-term earnings visibility. Investors should separate reported and adjusted results and watch whether European refinish volumes, raw-material costs and merger spending improve before assuming the planned combination will restore growth.