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Element Solutions (ESI) Up 2.1% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Element Solutions (ESI). Shares have added about 2.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Element Solutions due for a pullback? 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 drivers.

Element Solutions' Q2 Earnings and Sales Beat Estimates

Element Solutions recorded earnings from continuing operations of a penny per share in second-quarter 2020, down from 6 cents in the year-ago quarter.

Adjusted earnings per share (“EPS”) of 18 cents for the quarter surpassed the Zacks Consensus Estimate of 14 cents.

The company generated net sales of $387 million, down 15% year over year. The figure, however, surpassed the Zacks Consensus Estimate of $355 million. Organic net sales, barring the impact of currency changes, specific pass-through metal prices and acquisitions, fell 15% year over year.

Segment Highlights

Net sales in the Electronics segment fell 5% year over year to $253 million in the reported quarter. Organic net sales dipped 6% from the year-ago reported figure. Adjusted EBITDA was $58 million, down 4% year over year.

Net sales in the Industrial & Specialty unit fell 29% year over year to $134 million. Organic net sales declined 26%. Adjusted EBITDA in the segment was $27 million, down 33% year over year.

Financial Position

Element Solutions ended the quarter with cash and cash equivalents of $237.3 million, down 4.2% year over year. Long-term debt was $1,511.1 million at the end of the quarter, down 0.3% year over year.

The company generated cash flows from operating activities of $64 million in the reported quarter. Free cash flows for the second quarter was $61 million.

Outlook

The company expects adjusted EBITDA of $80 million for the third quarter of 2020. Moreover, it anticipates generating free cash flow of more than $185 million for the year.

Element Solutions also noted that it is difficult to predict macroeconomic conditions or operating results at this time due to the impact of the coronavirus outbreak.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Element Solutions has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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

Element Solutions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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