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Ashland (ASH) Down 1.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Ashland (ASH). Shares have lost about 1.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ashland due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Ashland's Earnings and Sales Surpass Estimates in Q1

Ashland logged profits of $56 million or 91 cents per share in the first quarter of fiscal 2021 (ended Dec 31, 2020), up from a profit of $32 million or 53 cents per share in the prior-year quarter.

Barring one-time items, adjusted earnings came in at 66 cents per share. It topped the Zacks Consensus Estimate of 44 cents per share.

Sales were up around 4% year over year to $552 million, surpassing the Zacks Consensus Estimate of $543.4 million. The company saw higher sales across its business segments in the quarter. It benefited from strong overall demand and cost-reduction actions in the quarter. Its industrial businesses continued to witness strong demand recovery.

Segment Highlights

Consumer Specialties: Sales in the segment rose 1% year over year to $296 million in the reported quarter. The company saw strong demand in most consumer end markets. This was offset by its exit from lower-margin product lines and continued challenges in Avoca.

Industrial Specialties: Sales in the division rose 8% year over year to $231 million on the back of improved demand for architectural coatings, construction and adhesive applications.

Intermediates & Solvents: Sales in the segment climbed 18% year over year to $33 million, driven by normalized internal sales volumes.

Financials

Cash and cash equivalents more than doubled year over year to $335 million at the end of the quarter. Long-term debt was $1,601 million at the end of the quarter, up around 7% year over year.

Cash provided by operating activities was $106 million in the reported quarter. Free cash flow was $76 million for the quarter.

Outlook

Ashland said that its first-quarter results demonstrate progress made by it towards strategic discipline, consistent organic growth, margin expansion and improved free cash flow conversion. It expects to deliver consistent results moving ahead notwithstanding the impacts of the coronavirus pandemic on global supply chains and consumer behavior.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Ashland has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Ashland has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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