We had three more good earnings reports from our companies this week, which I will touch on now.
Last night, Safety Insurance (SAFT) reported third-quarter earnings per share (EPS) of $2.53 vs. $0.98, which is much better than estimates of $1.45. The reason for the extreme earnings beat was that the 27.6% decline in insured losses due to lower auto usage during the COVID-19 shutdowns in Massachusetts more than offset the 1.5% decline in earned premiums from lower auto insurance rates. While this quarter is an outlier, and this level of profitability will not be repeated, SAFT remains a good value. It has normal annual earnings power of over $6.00 a share and a 5.2% dividend yield. SAFT is a buy below $75. My target is $88.
Kronos (KRO) reported third quarter EPS of $0.07 vs. $0.16 on a 5% decline in revenues to $416.9 million. Results were largely in-line with expectations, reflecting lower prices and volumes for titanium dioxide due to global economic weakness. The company did note that volumes improved as the quarter progressed, so there is hope that results are bottoming out. Despite the tough current environment, the stock has done well for us. We bought it at a very good price, and the rally should continue as the global economy heals. Buy KRO under $13.50. My target is $17.
Ingredion (INGR) reported third-quarter EPS of $1.77 vs. $1.86, which was $0.32 better than expectations. Sales declined 5% in the quarter, with lower volumes and currency issues contributing equally to the decline. Weakness in South America and restaurant sales continue to pressure results, although not to the same extent that they did in the second quarter.
The stock jumped nicely on the earnings beat but retreated as COVID-19 continues to cloud the outlook for the company’s restaurant-related sales. However, despite the tough environment this year, INGR will still come close to earning $6.00 per share. At 12X this estimate, with earnings likely to rise as business conditions improve, the stock is too cheap to resist. Buy INGR under $82. My target is $95. The 3.66% dividend adds to the attraction of the shares.