Ecovyst (ECVT) had a solid finish to 2022. Indeed, while Q4 sales of $182.8 million came in below the $189.3 million consensus due to production outages and unplanned maintenance in its Ecoservices business caused by Winter Storm Elliott, this nevertheless marked a solid 7.4% increase from the prior year on higher pricing and volume for its regeneration services. And with the latter also more than offsetting increases in variable costs for energy, freight and turnarounds, adjusted net income climbed 38.9% to $31.8 million, while a 7.3% drop in the number of weighted average shares outstanding resulting from the company’s strong buyback activity over the past year further boosted the bottom-line gain to 47.1% on a per share basis to 25 cents, which was actually 2 cents better than expected.

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Unfortunately, while the storm had only a modest impact on Q4 results, ECVT expects the related production outages to translate into lower availability and sales of virgin sulfuric acid in Q1. With the majority of the associated maintenance and repair costs also to be incurred in the current quarter, ECVT’s expects sales of $760-790 million in 2023, which is well below the $843.0 million analysts were looking for and likely the main reason for the stock’s weakness today.

But this lower view also includes about a $95 million reduction in pass-through pricing due to lower average sulfur prices, which has a minimal impact on actual profit levels. That’s why the $292.5 million midpoint of ECVT’s $285-300 million adjusted EBITDA forecast for 2023 is just $2.0 million lower than the $294.5 million consensus view. In fact, if you add back the roughly $7-8 million negative impact ECVT believes the latter will have on adjusted EBITDA in Q1, the midpoint would be closer to $300 million—or more than $5 million ahead of expectations.

In my view, this continues to reflect the underlying strong demand for its virgin sulfuric acid and regeneration services that remains thanks to high refinery utilization; the increasing needs for higher octane, cleaner burning premium fuels; and positive demand fundamentals across multiple industries and especially the mining sector. With these favorable trends carrying over into 2023 and demand for its low-carbon, green technology-supporting solutions remaining robust, even the weaker guidance provided points to a 5.7% rise in operating income at the midpoint despite the storm’s blow. And if you also factor in the extra boost earnings per share should enjoy from the substantially reduced share count, it’s not hard to see why growth in the bottom line should be even more impressive. As this plays out, I expect the stock to recover in kind.