Impact: Neutral to Slightly Negative
Q1/22 operating and financial results saw adj. earnings of $1.1M (-$7M YoY) or $0.01/sh (-$0.05/sh YoY), missing both consensus and RCS EPS estimates of $0.08 and $0.14, respectively. EPS was impacted by lower production and higher COVID related operating costs. While revenue remained strong, management highlighted that the cost pressures are temporary, should stabilize in Q2/22, while trending lower in H2/22. The scale of cost increases was a surprise to us, but it should be viewed as temporary. Management had warned of temporary cost pressures and adjusted 2022 guidance lower earlier which remains unchanged, helping to set expectations. Investors should focus on the many other highlights that outline KRR’s growth expectations. Expansions remain on track to double production by 2024 and we expect the market to focus on this long-term. That said, KRR has outperformed peers in 2022 and could see a correction on this news. We believe covid related costs to be mostly gone, and plan to refine our DCF model once the Beta Hunt PEA is available.