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Univar's (UNVR) Earnings Beat, Sales Lag Estimates in Q3

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Univar Solutions Inc. (UNVR - Free Report) recorded a profit (on a reported basis) of $28.9 million or 17 cents per share in third-quarter 2020, up from $2.5 million or a penny per share in the year-ago quarter.

Barring one-time items, earnings per share were 34 cents, down from 36 cents in the year-ago quarter. However, the figure surpassed the Zacks Consensus Estimate of 23 cents.

The company’s revenues were $2,009.2 million in the quarter, down around 16% year over year. It trailed the Zacks Consensus Estimate of $2,203.4 million.

Sales were hurt by reduced demand in the global industrial end markets, lower sales due to the Environmental Sciences divestiture as well as price deflation affecting specific products.

 

Univar Inc. Price, Consensus and EPS Surprise

 

Univar Inc. Price, Consensus and EPS Surprise

Univar Inc. price-consensus-eps-surprise-chart | Univar Inc. Quote

 

Segment Review

Revenues in the USA division fell around 20% year over year on a reported basis to $1,269 million in the quarter. The decline was due to lower industrial end market demand, the Environmental Sciences divestiture, price deflation and energy headwinds. These were partly offset by higher demand for products in essential end markets. Gross profit fell 12% year over year.

The EMEA segment raked in revenues of $400 million, down 6% year over year. The decline was caused by reduced industrial and end market demand. Gross profit was up 0.2% year over year.

Revenues in the Canada segment fell 17% year over year to $235.4 million. The decline was due to lower agriculture and energy demand, the Environmental Sciences divestiture and price deflation. Gross profit fell roughly 15% year over year.

Revenues from the LATAM unit rose roughly 3% to $120.5 million on increased demand for products in industrial solutions and certain essential end markets. Gross profit also increased around 13% year over year.

Financials

Univar ended the third quarter with cash and cash equivalents of $273.7 million, a more than two-fold year-over-year rise. Long-term debt was $2,660.4 million, down around 11% year over year.

Net cash provided by operating activities was $8.1 million in the third quarter.

Outlook

The company expects adjusted EBITDA to be roughly $140-$145 million for the fourth quarter of 2020. It also sees adjusted EBITDA to be in the band of $629-$634 million for full-year 2020.

Univar is actively managing its expenses and looking to reduce costs to maintain its financial strength. Further, these savings are expected to generate more than $40 million in cost reductions for 2020, which are incremental to the net synergies expected from the Nexeo acquisition of $45 million. It expects to achieve $120 million in annual Nexeo net synergies by early 2022.

Price Performance

Univar’s shares have lost 27.1% year to date compared with 3.4% decline recorded by the industry.

 

 

Zacks Rank & Key Picks

Univar currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited (AEM - Free Report) , Barrick Gold Corporation (GOLD - Free Report) and B2Gold Corp. (BTG - Free Report) .

Agnico Eagle has a projected earnings growth rate of 103.1% for the current year. The company’s shares have gained around 42% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold has an expected earnings growth rate of 100% for the current year. The company’s shares have surged around 79% in the past year. It currently carries a Zacks Rank #2 (Buy).

B2Gold has a projected earnings growth rate of 250% for the current year. The company’s shares have shot up roughly 103% in a year. It currently carries a Zacks Rank #2.

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