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Ashland's (ASH) Q3 Earnings Miss Estimates, Revenues Beat

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Ashland Global Holdings Inc. (ASH - Free Report) generated profits of $87 million or $1.40 per share in the third quarter of fiscal 2021 (ending Jun 30, 2021) compared with $50 million or 81 cents in the prior-year quarter.

Barring one-time items, adjusted earnings came in at $1.22 per share. It increased from the year-ago quarter’s figure of $1.12 but missed the Zacks Consensus Estimate of $1.27 per share.

Sales increased 11% year over year to $637 million and beat the Zacks Consensus Estimate of $635.9 million. Strong demand more than offset factors like weakness in hand-sanitizer ingredients and Avoca.

The company’s results were somewhat negatively impacted by global supply-chain disruptions and raw-material cost escalation in Performance Adhesives that contributed to higher-than-expected costs during the quarter. Supply-chain and logistics constraints also offset the strong demand and affected the company’s ability to fully meet its customer demand. However, Ashland benefited from sales in industrial businesses that reached the pre-pandemic levels, the resilient demand in the core consumer products and favorable foreign-currency impacts.

Segment Highlights

Consumer Specialties: Sales in the segment declined 1% year over year to $340 million in the reported quarter. The company saw softer pharma sales year over year and improved demand in nutrition and nutraceuticals.

It witnessed lower sales in personal care and household end markets due to weakness in hand-sanitizer ingredients and Avoca when compared to the prior year. However, these were partly neutralized by growth in sales from the recent acquisition of Schulke & Mayr’s personal care business.

Industrial Specialties: Sales in the division rose 28% year over year to $263 million on the back of improved demand across all end markets, except for the global energy market.

Intermediates & Solvents: Sales in the segment increased 32% year over year to $49 million, led by higher pricing for both merchant and captive sales.

Financials

Cash and cash equivalents dropped around 37% year over year to $262 million at the end of the quarter. Long-term debt was $1,578 million at the end of the quarter, up around 2% year over year.

Cash flows provided by operating activities amounted to $233 million in the reported quarter, increasing from $140 million in the prior-year quarter. Free cash flow was $210 million for the quarter compared to $112 million in the prior-year quarter.

Outlook

Ashland said that it is working to leverage the ongoing strong demand to satisfy the incremental demand of its consumers. The company also reaffirmed its expectations for full-year results.

Price Performance

Shares of Ashland have grown 9.8% in a year against the industry’s decline of 14.8%.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

Currently, Ashland carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the basic materials space include Orion Engineered Carbons S.A (OEC - Free Report) , LyondellBasell Industries N.V. (LYB - Free Report) and Cabot Corp. (CBT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Orion has a projected earnings growth rate of 79.8% for the current year. The company’s shares have grown 70.5% over a year.

LyondellBasell has a projected earnings growth rate of 222.6% for the current year. The company’s shares have risen 46.5% over a year.

Cabot has a projected earnings growth rate of 137.5% for the current year. The company’s shares have rallied 42.4% over a year.