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Ashland (ASH) Down 5.8% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Ashland (ASH). Shares have lost about 5.8% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Ashland's Earnings Beat Estimates in Q1, Revenues Lag

Ashland recorded profits from continuing operations of $32 million or 55 cents per share in the first quarter of fiscal 2022 (ending Dec 31, 2021), down from $43 million or 70 cents in the prior-year quarter.

Barring one-time items, adjusted earnings came in at 88 cents per share, up from the year-ago quarter’s figure of 69 cents. It beat the Zacks Consensus Estimate of 87 cents.

Sales rose around 9% year over year to $512 million, but lagged the Zacks Consensus Estimate of $512.7 million. The top line was driven by strong demand across the company’s core global end markets, higher pricing and contributions from the Schulke & Mayr acquisition.

Segment Highlights

Life Sciences: Sales in the segment were flat year over year at $170 million in the reported quarter. Higher pricing and strong demand were offset by delayed shipments of confirmed orders at the end of the quarter.

Personal Care: Sales in the division rose 17% year over year to $147 million. Sales were driven by the Schulke & Mayr acquisition as well as higher demand and pricing across core personal-care end markets.
 
Specialty Additives: Sales in the segment increased 6% year over year to $156 million, led by strong demand and higher pricing across all end markets.

Intermediates: Sales in the segment went up 61% year over year to $53 million, led by higher prices in all product lines. The company saw higher captive internal product and merchant sales on the back of higher pricing.

Financials

Cash and cash equivalents were $194 million at the end of the quarter, down around 42% year over year. Long-term debt was $1,580 million, down around 1% year over year.

Cash flows provided by operating activities were $14 million in the reported quarter, down from $81 million in the prior-year quarter. Free cash flow was $26 million in the quarter compared with $74 million in the prior-year quarter.

Outlook

Ashland continues to expect sales in the range of $2.25-$2.35 billion for fiscal 2022. It also anticipates adjusted EBITDA between $550 million and $570 million.

The company noted that it sees underlying demand to remain strong and expects its pricing actions to cover the anticipated inflation. It also projects the current shipping challenges to continue over the coming quarters. The company remains committed to take further measures to recover any additional cost inflation. It will also continue to proactively build inventories in major regions to mitigate the supply-chain and shipping headwinds.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Ashland has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Ashland has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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