It has been about a month since the last earnings report for Ashland (
ASH Quick Quote ASH - Free Report) . Shares have added about 2.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ashland due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ashland’s Q3 Earnings Miss Estimates, Revenues Beat
Ashland 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: 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
Currently, Ashland has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Ashland has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.