Shares of NLI Holdings, Inc. NL have gained 9.9% since reporting results for the second quarter of 2026 compared with the S&P 500 index’s 0.1% return. Over the past month, the stock has risen 12%, outperforming the S&P 500’s 4.1% advance.
Earnings & Sales Performance
For the quarter ended June 30, NLI’s net sales, which reflect its consolidated CompX operations, increased 8% year over year to $43.6 million from $40.3 million a year earlier. Net income attributable to NLI stockholders rose to $9 million, or 18 cents per share, from $0.3 million, or 1 cent per share. Income from operations increased 119% to $6.1 million from $2.8 million in the prior-year quarter, while the gross margin advanced 21% to $15.5 million from $12.9 million. The gross margin widened to 36% of sales from 32%.
Other Key Business Metrics
CompX’s segment profit increased 41% year over year to $8.9 million, and its segment margin expanded to 20% from 16%. Security Products sales rose 9% to $33.3 million, helped by healthcare, transportation, distribution and tool-storage demand. Reporting-unit profit increased 39% to $8 million, with its profit margin reaching 24% from 19%. Marine Components sales increased 6% to $10.3 million as a $1.6-million rise in industrial-market sales more than offset a $1-million decline in government-market sales. Its reporting-unit profit rose 16% to $2.8 million.
NLI recorded $4.6 million of equity in earnings from its roughly 31% interest in Kronos Worldwide, reversing a $2.8-million loss a year earlier. Kronos’ sales increased 13% to $558.1 million, and operating income rose to $37.6 million from $7.4 million. Titanium dioxide sales volume increased 16%, while production volume grew 8%.
Management Commentary
Management attributed CompX’s improvement mainly to higher sales and gross margin in Security Products, with a smaller contribution from Marine Components. Favorable customer and product mix, lower employer-related medical expenses and a one-time recovery of prior-period import costs supported Security Products margins. It said that CompX’s supply chains were stable and transportation delays minimal, though tariffs, shipping costs and inflation continued to raise input costs.
At Kronos, management cited market-share gains across major markets, particularly Europe, amid changing competitive and supply conditions, and anti-dumping duties. It said that demand remained below historical levels, especially in North America, but constrained industry inventories, longer customer lead times and a stronger year-over-year backlog entering the third quarter improved production-planning flexibility.
Factors Behind the Results
Kronos’ 16% volume increase added about $79 million to quarterly sales, and currency movements added roughly $10 million. Those gains were partly offset by a 3% decline in average titanium dioxide prices, which reduced sales by about $15 million, and an unfavorable product mix. Lower feedstock costs, reduced unabsorbed fixed costs and benefits from fourth-quarter 2025 cost reductions lifted profitability. Unabsorbed fixed costs were immaterial versus about $20 million a year earlier. However, currency movements reduced Kronos’ operating income by about $12 million.
NLI also benefited from a $0.5-million unrealized marketable-securities gain versus a $0.1-million loss and from $0.7 million lower corporate expenses, primarily reflecting reduced environmental-remediation costs. Partly offsetting these items, interest and dividend income declined 24% to $1.2 million, while income tax expenses were $2.5 million versus a benefit of less than $0.1 million.
Outlook
CompX expects 2026 sales, gross margin and segment-profit margin to exceed the 2025 levels, excluding a prior-year customer stocking event. It anticipates continued strength in healthcare, transportation and tool storage, plus industrial demand for Marine Components, although tariff and raw-material pressures could challenge second-half margins.
Kronos expects full-year sales to exceed the 2025 levels, and gross and operating margins to improve. It expects pricing to remain favorable, facilities to operate within their normal capacity range and cash on hand to improve over the remainder of the year. NLI nevertheless expects 2026 net general corporate expenses to exceed 2025 because of higher second-half litigation costs.
Other Developments
On May 26, NLI Holdings, formerly NL Industries, reincorporated in Delaware through a merger transaction. The board also declared a third-quarter dividend of 10 cents per share, payable Sept. 22 to holders of record as of Sept. 3.
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NLI Holdings, Inc. (NL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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