Title

Earning Preview: Stepan Q4 revenue is expected to increase by 9.25%, and institutional views are bullish

Abstract

Stepan Company will report its fourth-quarter 2025 results on February 23, 2026 Pre-Market; this preview reviews the last reported quarter’s metrics, sets out current revenue, margin, net profit and adjusted EPS expectations with year-over-year context, highlights segment dynamics, and synthesizes prevailing institutional views ahead of the print.

Market Forecast

For the current quarter, forecasts indicate revenue of $570.60 million and adjusted EPS of $0.40, implying year-over-year growth of 9.25% for revenue and 16.18% for adjusted EPS; EBIT is projected at $18.55 million, up 38.43% year over year. Forecasts for gross profit margin and net profit margin were not formally indicated, though the earnings mix implied in the models suggests modest sequential improvement off last quarter’s levels if price and cost spreads hold.

Surfactants remain the main revenue contributor, and the market’s focus is on whether volumes stabilize and price-cost spreads hold through quarter-end to support incremental margin recovery while protecting share in core applications. The most promising growth vector cited by investors is Polymers, which produced $143.93 million of revenue in the last reported quarter; while segment-specific year-over-year data were not disclosed, Street models broadly imply growth direction in line with the company-level 9.25% year-over-year revenue forecast for Q4.

Last Quarter Review

In the last reported quarter, Stepan Company delivered revenue of $590.28 million, a gross profit margin of 12.03%, GAAP net income attributable to shareholders of $10.84 million, a net profit margin of 1.84%, and adjusted EPS of $0.48, representing a 7.94% year-over-year increase in revenue and a 53.40% year-over-year decline in adjusted EPS.

A key financial highlight was that revenue came in close to expectations, missing the prior consensus by $3.37 million, while quarter-on-quarter net profit contracted by 4.43% as gross margin compression and mix effects offset top-line growth. Main business highlights show Surfactants accounted for $422.36 million, Polymers for $143.93 million, and Specialty Products for $24.00 million; overall revenue grew 7.94% year over year, with the revenue base concentrated in Surfactants at 71.55% of the mix, followed by Polymers at 24.38% and Specialty Products at 4.07%.

Current Quarter Outlook

Surfactants: volume stability, pricing discipline, and spread recovery define the near-term calculus

The path of adjusted profitability in the current quarter hinges on how effectively Surfactants sustain the sequential improvements seen in top-line volume while protecting price-cost spreads. The last print showed a 12.03% gross margin and a 1.84% net margin, levels that leave room for incremental improvement if input costs and selling prices move favorably. In the fourth quarter, management commentary in prior periods has typically emphasized balancing share retention with margin integrity; for this setup, consensus EPS of $0.40 and EBIT of $18.55 million imply an expectation that Surfactants margins should at least hold flat to slightly improve versus the prior quarter if procurement costs cooperate and product mix does not dilute.

The principal swing factor inside Surfactants is the relationship between raw-material costs and realized pricing. With the company’s last quarter net profit dipping by 4.43% quarter over quarter, investors are monitoring whether the fourth quarter sees a stabilization in contribution margins as contracts reset and as any lagged pass-throughs take effect. Even small improvements in spread can have an outsized impact given the segment’s 71.55% share of last quarter’s revenue. If realized pricing remains steady and input costs trend consistent with recent trajectories, the segment could underwrite a disproportionate share of the projected 16.18% year-over-year expansion in adjusted EPS at the corporate level.

Volume dynamics are the other lever to watch in the quarter. The revenue trajectory in the last quarter suggests demand was sufficiently resilient to yield a 7.94% year-over-year increase in the consolidated top line. For Q4, the revenue forecast of $570.60 million embeds seasonal effects and a slightly softer top line than Q3, but the year-over-year growth of 9.25% still anticipates constructive demand conditions against the prior-year comp. In this frame, if Surfactants volumes track plan, mix remains balanced, and pricing achieves targeted retention, the company stands to see EBITDA leverage that is consistent with the 38.43% year-over-year growth embedded in the EBIT forecast, even if gross margin progress remains incremental.

Polymers: sustained order quality and mix resilience position the segment to outgrow the base

Polymers generated $143.93 million in the last reported quarter and accounted for 24.38% of consolidated revenue, providing a meaningful second engine for earnings quality. Consensus for the fourth quarter does not break out segment-level growth explicitly, but buy-side modeling generally contemplates the segment outpacing company-level growth when order mix skews toward higher-value applications. With the consolidated revenue forecast implying a 9.25% year-over-year increase, a reasonable base case for investors is that Polymers tracks at or above that rate if orders align with the company’s recent commercial focus on margin-accretive volumes.

The crux for the quarter is whether sell-through rates and backlogs support steady plant utilization without margin dilution. The sharp drop in adjusted EPS year over year in the last print (-53.40%) underscores the sensitivity of earnings to mix and fixed cost absorption. Polymers are often more margin-accretive than base blends in varied applications; if fourth-quarter production schedules and shipments adhere to plan, the implied $18.55 million of EBIT and $0.40 of adjusted EPS would be consistent with improved mix contribution from this segment. That said, management’s execution on price realization relative to raw material variation remains critical, as small adverse moves can offset volume gains.

From a capital and operating point of view, investors will pay close attention to whether the company signals any meaningful changes to capacity alignment or manufacturing cadence that might foreshadow 2026 mix. A steady cadence would be taken as confirmation that last quarter’s revenue base of $590.28 million has a supportive foundation, while any commentary about order timing or destocking pockets would be interpreted in the context of the consolidated Q4 revenue forecast. In short, sustained order quality and balanced pricing discipline in Polymers are key to enabling the operating leverage implied by the 38.43% year-over-year EBIT growth forecast.

Key stock price swing factors this quarter: margin trajectory, operating leverage, and guidance color

The first and most immediate swing factor is the gross margin trajectory relative to the 12.03% level reported last quarter. The Street’s 9.25% year-over-year revenue growth forecast for Q4 provides room for adjusted EPS to expand 16.18% year over year if gross margin ticks up and if net margin can improve from the prior 1.84% level, even marginally. A flat or lower gross margin outcome, by contrast, would compress the earnings bridge and likely pull the realized EPS below the $0.40 consensus, given the company’s operating cost base. This makes the spread commentary and any visibility into early-first-quarter pricing particularly relevant to how shares trade on the release.

The second swing factor is operating leverage. The modeled 38.43% year-over-year increase in EBIT to $18.55 million implies that costs ex-raw materials should be well contained, with fixed cost absorption supported by stable plant throughput. If management pairs disciplined overhead control with targeted volume growth in accretive SKUs, the incremental margin captured can substantially close the gap between the last quarter’s compressed net margin and the level implied by consensus. Conversely, if fourth-quarter volumes underwhelm or if production schedules are adjusted in response to near-term order patterns, fixed cost absorption may weigh on EBIT, increasing the risk of a miss versus expectations.

The third swing factor is the quality of guidance color and how it triangulates with the outturn. Investors will scrutinize any commentary around the first-half 2026 demand cadence and input-cost outlook to assess whether fourth-quarter results are sustainable or transitory. Clarity on segment priorities, the cadence of price adjustments, and the trajectory of working capital can affect valuation reactions even if reported numbers align with consensus. In particular, if management frames an outlook consistent with revenue growth near the Q4 run-rate and suggests incremental margin progression, the upgrade-driven sentiment shift in January could be reinforced; if guidance appears cautious, the shares may consolidate even on an in-line print.

Analyst Opinions

The collected institutional views in the January 1, 2026 to February 16, 2026 window skew bullish, with the ratio of bullish to bearish opinions at 1:0 based on published actions in the period. Seaport Research upgraded Stepan Company to Buy with a $75.00 price target, a stance that aligns with consensus expectations for a year-over-year acceleration in Q4 profitability indicators, including a 38.43% increase in EBIT and a 16.18% increase in adjusted EPS. The upgrade reflects improved investor confidence that margin headwinds observed in the last reported quarter—when adjusted EPS declined 53.40% year over year despite a 7.94% revenue increase—are moderating into year-end.

This view is consistent with the current quarter’s revenue forecast of $570.60 million and the implied operating leverage embedded in the Street’s Q4 models. With Surfactants representing 71.55% of the latest quarterly revenue base and Polymers accounting for 24.38%, the investment case leans on modest spread recovery, disciplined price realization, and targeted growth in accretive volumes to lift margins from the last reported gross margin of 12.03% and net margin of 1.84%. The bullish perspective anticipates that even slight margin progress can translate into a material uplift in earnings, given the scale of the Surfactants business and the favorable mix potential in Polymers.

From a trading standpoint, the upgrade-sensitive set-up means the market may give the company the benefit of the doubt on minor top-line variability so long as the margin narrative improves. If management delivers Q4 results that map to the $0.40 adjusted EPS and $18.55 million EBIT forecasts, and articulates a credible path to early-2026 gross margin expansion, the path of least resistance for sentiment is upward. Conversely, the bullish camp acknowledges that a flat-to-weaker gross margin print versus last quarter’s 12.03% would likely recalibrate near-term expectations. The prevailing institutional view, however, frames this risk as manageable against the opportunity for earnings recovery, and grounds the Buy thesis in the combination of a 9.25% year-over-year revenue growth outlook, implied operating leverage, and the potential for incremental margin improvement as spread conditions normalize.

Taken together, the majority view emphasizes that the earnings bridge for Q4 is achievable if price-cost spreads stabilize and if the company executes on mix priorities across Surfactants and Polymers. The path to outperformance is not predicated on aggressive volume assumptions; rather, it relies on incrementally better margins on a revenue base projected at $570.60 million. With institutional positioning warmed by the recent upgrade and the consensus earnings framework calling for 16.18% year-over-year growth in adjusted EPS, the bullish side expects the fourth quarter to mark a constructive step toward re-accelerating profitability after a challenging comparison in the last reported period.