What happened
Shares of Ferroglobe(NASDAQ: GSM) are seeing significant gains Tuesday following the company's second-quarter earnings release. The silicon and metal alloys specialist's share price was up 7.7% as of 11:15 a.m. ET, according to data from S&P Global Market Intelligence.
Ferroglobe published its Q2 results after the market closed yesterday and reported results that were significantly better than Wall Street was anticipating. While the average analyst target had guided for non-GAAP (adjusted) earnings per share of $0.10 on sales of $441.8 million, the company reported per-share earnings of $0.30 on sales of $456.4 million.
So what
Ferroglobe's revenue came in significantly better than the market had expected but still declined roughly 46% year over year. On the other hand, sales in Q2 did climb 14% on a sequential-quarterly basis -- and earnings for the period crushed Wall Street's target. The company also continued to make progress on improving its balance sheet, ending the period with cash and equivalents increasing to $363 million and net debt declining to $37 million.
Now what
Even with today's gains, Ferroglobe is valued at less than 10x this year's expected earnings.
GSM P/E Ratio (Forward) data by YCharts.
While sales have seen large declines lately, the company is subject to cyclical pricing trends in the commodities space and could see significant performance improvements in the event that silicon prices increase. Ferroglobe may also be poised to benefit from onshoring trends.
With tensions rising between the U.S. and China, the company could see significant demand tailwinds. The U.S. Department of Energy recently added silicon metal to its list of critical materials.
While most of the world's silicon metal is currently sourced from China, Ferroglobe stands as the largest Western producer. It could be a big winner if onshoring continues to pick up steam.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
