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Bear of the Day: Ashland Global (ASH)

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Ashland Global (ASH - Free Report)  is a Zacks Rank #5 (Strong Sell) that is a leading specialty chemicals company. Ashland provides additives and specialty ingredients to customers in a range of consumer and industrial markets, such as architectural coatings, construction, energy, food and beverage, nutraceuticals, personal care, and pharmaceutical. 

The stock had a great 2021, moving higher by over 30%. The stock is sitting just under all-time highs, but investors should be cautious at these elevated prices as the company seeing estimates fall across all-time frames.

About the Company

Ashland is headquartered in Wilmington, DE and employs over 4,000 people. The company was founded in 1924 and has four primary reporting segments:  Life Sciences (34% of 2021 sales), Personal Care and Household (27% of sales)), Specialty Additives (30% of sales) and Intermediates & Solvent (8% of sales).

Ashland is valued at $6 billion and has a Forward PE of 23. The company holds a Zacks Style Score of “D” in Momentum and “C” in both Growth and Value. Ashland pays out a dividend with 1.14% yield.   

Q4 Earnings

Ashland Global reported in early November, missing earnings by 5%. Revenue came in below expectations, but EBITDA was up year over year.

The company had an investors day a few days later, which took the stock to all-time highs. Ashland says they are approaching FY22 EBITDA margins in FY22. They are targeting FY26 sales over $3.2B and see strong opportunity for M&A.

Investors applauded the numbers, buying the stock up over $110. However, looking forward, its seems analysts aren’t as bullish as investors have been. The stock continues to hold near highs as estimates continue to fall.

Estimates

Over the last 90 days, estimates are dropping across all-time frames. For the current quarter, we have a 13% drop as numbers fell from $1.05 to $0.91. For the current year, estimates have fallen from $5.29 to $4.65, or 12%.

As the stock sits at all-time highs, investors should be aware that numbers are falling. Earnings are due up on February 2nd, when we can expect to see the company break down, or maintain its momentum.

Technical Take

Earnings will be the catalyst, but those numbers could likely fuel a technical move lower. If there is a disappointment like the estimates suggest, a break of the 50-day moving average at $104 would bring in sellers to $100, where the stock found support in December.

In Summary

Ashland has done very well navigating the pandemic and the stock price shows that by sitting just under all-time highs. However, investors should be cautious ahead of earnings as earnings estimates have been falling.

For now, a better option in the chemical space might be AdvanSix (ASIX). The stock is a Zacks Rank #2 (Buy) and the company is coming off a 18% EPS beat last quarter.   


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