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Ingevity (NGVT) Up 14% in 6 Months: What's Driving the Stock?

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Ingevity Corporation’s (NGVT - Free Report) shares have climbed 13.6% over the past six months against its industry’s decline of 5.8%.

Zacks Investment Research
Image Source: Zacks Investment Research

Let’s dive into the factors behind this Zacks Rank #3 (Hold) stock’s price appreciation.

What’s Favoring the Stock?

Impressive results in the second quarter and upbeat prospects have contributed to the upside in Ingevity’s share price. Its adjusted earnings of $1.55 per share in the quarter beat the Zacks Consensus Estimate of $1.21. Its top line rose 32.4% year over year to $358.4 million, beating the Zacks Consensus Estimate of $331.6 million.

The company raised its outlook for 2021 sales to $1.32-$1.36 billion from the prior estimation of $1.275-$1.325 billion. It expects adjusted EBITDA of $425-$440 million, up from the prior view of $410-$430 million. Ingevity is hopeful of a strong performance in the second half of the year despite challenges from transportation and logistics, disruptions in inputs of the auto sector and raw-material cost inflation.

Ingevity is poised to gain from its strategy of pursuing value-creating acquisitions. The buyout of Georgia-Pacific’s pine chemicals business is expected to create net synergies of more than $11 million through optimizations in manufacturing and logistics and procurement costs. The acquisition of the Capa caprolactone business has provided a new technology platform to drive revenue and earnings growth, and the company’s results in 2021 are expected to be positively impacted by it.

The country-wide implementation of China’s new gasoline emission standard, the China 6 national standard, has also favored Ingevity. In the last reported quarter, the company saw higher demand for its automotive activated carbon products in China on the back of strong automotive production. There is also a strong rebound in demand in China on the back of the implementation of the standard with the momentum likely to continue in the balance of 2021.

The company is also witnessing robust growth in both engineered polymers and industrial specialties. An improvement in demand across all its sectors is expected to lend support to its margins in 2021.

Earnings estimates for Ingevity have also been going up over the past three months with the Zacks Consensus Estimate for 2021 earnings increasing 3.4%. The favorable estimate revisions instill investors’ confidence in the stock.

Other Stocks to Consider

Some better-ranked stocks in the basic materials space are BASF SE (BASFY - Free Report) , Aperam S.A. (APEMY - Free Report) and Avient Corporation (AVNT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BASF has a projected earnings growth rate of 96.7% for the current year. The company’s shares have rallied 26.7% over a year.

Aperam has a projected earnings growth rate of 429.8% for the current year. The company’s shares have surged 104.1% over a year.

Avient has a projected earnings growth rate of 75.2% for the current year. The company’s shares have climbed 94.2% over a year.

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