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Ingevity (NGVT) Up 58% in a Year: What's Behind the Rally?

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Shares of Ingevity Corporation (NGVT - Free Report) have rallied 58% in the past year, significantly outperforming the industry’s rise of roughly 4.9%.



The company has a market cap of roughly $4.2 billion. Average volume of shares traded in the past three months was around 231.6K.  

Let’s take a look at the factors that are driving this chemical company.

Driving Factors

Better-than-expected earnings performance, buoyant outlook and upbeat prospects from the Georgia-Pacific’s pine chemicals business buyout are contributing to the rally in Ingevity’s shares.

Ingevity posted a profit of $46.7 million or $1.10 per share in second-quarter 2018, up roughly 45% year over year. Adjusted earnings of $1.12 beat the Zacks Consensus Estimate of 99 cents.

Notably, the company has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 20.6%.

Ingevity, in its second-quarter call, stated that it is optimistic about 2018, courtesy of benefits from improving market conditions for basic materials and high-value added technologies. The company increased the mid-point and narrowed the range of 2018 guidance for adjusted EBITDA to $302-$314 million from $293-$307 million. The company projects sales between $1.10 billion and $1.13 billion for the year.

Ingevity should gain from its strategy to pursue value-creating acquisitions. Earlier this year, the company closed the acquisition of Georgia-Pacific’s pine chemicals business for $310 million. The buyout contributed to sales in the Performance Chemicals division in the second quarter. The acquisition is expected to create net synergies of roughly $11 million through manufacturing optimization, lower logistics costs and leveraged procurement costs.

Moreover, higher adoption of tall oil fatty acid (TOFA)-based products is driving results in the Performance Chemicals division. Healthy TOFA pricing had positive impact on the margins of the division during first-half 2018. The company also expects high margin application areas to continue gaining strength.

Ingevity Corporation Price and Consensus

 

Ingevity Corporation Price and Consensus | Ingevity Corporation Quote

Zacks Rank & Other Stocks to Consider

Ingevity currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the basic materials space are Trinseo S.A. (TSE - Free Report) , Huntsman Corporation (HUN - Free Report) and Celanese Corporation (CE - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Trinseo has an expected long-term earnings growth rate of 12%. Its shares have moved up 12.6% in the past year.

Huntsman has an expected long-term earnings growth rate of 8.5%. Its shares have returned 13.4% in a year.

Celanese has an expected long-term earnings growth rate of 10%. Its shares have gained 19.1% in the past year.

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