A month has gone by since the last earnings report for Ingevity (NGVT). Shares have added about 14.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ingevity 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 catalysts.
Ingevity recorded a third-quarter 2024 loss of $107.2 million or $2.95 per share. This compares unfavorably with a profit of $25.2 million or 69 cents in the year-ago quarter. Excluding one-time items, adjusted earnings in the quarter were $1.10 per share, down from $1.21. The figure surpassed the Zacks Consensus Estimate of 60 cents.
Revenues fell 15.5% year over year to $376.9 million in the quarter. The downside is attributable to the repositioning of the Performance Chemicals segment, which includes limiting exposure to specific markets in the Industrial Specialties product line and weather-related impacts in the Road Technologies product line. The decline was partly offset by increased sales of Performance Materials and Advanced Polymer Technologies.
The Performance Chemicals division generated revenues of $177 million in the reported quarter, down around 30.8% year over year. Road Technologies' product line sales of $119 million were down 8% due to bad weather conditions in key North American regions. Industrial Specialties product line sales of $58 million fell 54%, owing to the impact of the segment's repositioning measures, which are aimed at lowering exposure to lower margin end markets and persistent deterioration in industrial demand. Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the segment fell 20% to $19.8 million, reflecting higher CTO costs and ongoing sluggish industrial demand.
Revenues in the Performance Materials unit rose around 2.6% year over year to $151.1 million. The upside was due to strategic pricing adjustments. Segment EBITDA was $80.6 million, up 8%, driven by operational improvements that led to lower input costs and better manufacturing efficiency.
Sales in the Advanced Polymer Technologies segment were up 14% to $48.8 million. The upside was due to higher volumes. Segment EBITDA was $9.8 million, down 13%, and segment EBITDA margin was 20.1%. Higher volume resulted in better utilization rates, but these benefits were offset by reduced prices and unfavorable product mix.
The third-quarter operating cash flow was $46.5 million, with free cash flow of $28.5 million, which included the first of two $50 million payments to terminate a long-term CTO supply contract, as well as the impact of $21 million in restructuring expenses. The second and final termination payment of $50 million was made in October. There were no share repurchases during the quarter, leaving $353.4 million remaining under the current $500 million authorization. Net leverage was flat with the previous quarter at 4X, but is likely to improve beginning next quarter.
During the quarter, the company began to notice the benefits of repositioning its Performance Chemicals segment. Ingevity’s focus over the next few quarters will be on execution to ensure that it maximizes the benefits of its approach. The company anticipates sales between $1.40 billion and $1.50 billion, with adjusted EBITDA between $350 million and $360 million for 2024.
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -214.29% due to these changes.
At this time, Ingevity has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Ingevity has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Ingevity belongs to the Zacks Chemical - Specialty industry. Another stock from the same industry, Sherwin-Williams (SHW), has gained 8.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Sherwin-Williams reported revenues of $6.16 billion in the last reported quarter, representing a year-over-year change of +0.8%. EPS of $3.37 for the same period compares with $3.20 a year ago.
Sherwin-Williams is expected to post earnings of $2.08 per share for the current quarter, representing a year-over-year change of +14.9%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Sherwin-Williams. Also, the stock has a VGM Score of C.
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