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Univar Solutions (UNVR) Up 36% YTD: What's Driving the Stock?
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Univar Solutions Inc.'s shares have risen 36.3% year to date, outperforming its industry’s growth of 13.3%. It has also topped the S&P 500’s 21.6% rise over the same period.
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Let’s dive into the factors behind this Zacks Rank #2 (Buy) stock’s price appreciation.
What’s Favoring Univar?
Impressive results in the third quarter and upbeat prospects have contributed to the company’s share price increase. Its adjusted earnings of 62 cents per share in the quarter beat the Zacks Consensus Estimate of 43 cents. It generated net sales of $2,487.9 million, up 23.8% year over year. The top line beat the Zacks Consensus Estimate of $2,261.6 million.
Univar is benefiting from higher prices, strategic acquisitions, cost minimization and a robust liquidity position. The benefits of chemical price inflation and strong market demand will likely lead to a solid fourth-quarter performance.
Univar stands to gain from its market expansion and acquisition moves. The company is continuously seeking opportunities to enter new regions, reinforce product and service portfolio. It is also strengthening end-market capabilities through strategic buyouts. The acquisition of Nexeo Solutions has enhanced its capabilities and accelerated its ability to create significant value for customers, supplier partners, employees and shareholders. The integration of Nexeo is anticipated to bring in $25 million net synergies for this year. The company is on track to achieve an annual net synergy of $120 million (before tax) from Nexeo by first-quarter 2022.
Additionally, the company made noteworthy strides in the third quarter in its previously announced Streamline 2022 (S22) Program, designed to boost operational agility and sales. Univar looks to improve adjusted EBITDA margins by 9% by the end of 2022 and expects to reduce leverage to 2.6x or lower by the end of 2021.
The company also has a solid liquidity position. At the end of third-quarter 2021, its liquidity was nearly $1 billion, including around $221 million cash-in-hand and additional availability under committed, asset-based credit facilities. The company also expects strong liquidity and the majority of its debt obligations to mature in 2026 and beyond. Long-term debt was $2,198.8 million at the end of third-quarter 2021, falling 17.4% year over year. UNVR’s strong liquidity should allow it to meet its short-term debt obligations. It also announced a $500 million share repurchase program owning to its strong financial performance.
Univar remains committed to cost-cutting, expense management and productivity actions that are helping it minimize operational costs and boost margins. It is taking a number of actions to reduce costs in the wake of the pandemic, including a reduction in travel and other discretionary spending.
Moreover, Univar raised its guidance for adjusted EBITDA to the band of $770-$780 million from the previously expected $705-$725 million for 2021. Its adjusted EBITDA was $635.8 million in 2020.
Earnings estimates for Univar have also been going up over the past three months. The Zacks Consensus Estimate for 2021 earnings has increased 9% over the same time frame. The favorable estimate revisions instill investors’ confidence in the stock.
Nutrien has an expected earnings growth rate of 212.2% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 12.9% upward over the past 60 days.
Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It delivered a trailing four-quarter earnings surprise of roughly 73.5%, on average. NTR has rallied around 35% in a year.
AdvanSix has an expected earnings growth rate of 197% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 14.1% upward over the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in each of the four trailing quarters, with an earnings surprise of 47%, on average. ASIX’s shares have surged 157.4% over a year.
Celanese has an expected earnings growth rate of 139.7% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 9.1% upward over the past 60 days.
Celanese beat the Zacks Consensus Estimate for earnings in each of the four trailing quarters and pulled off an earnings surprise of 12.7%, on average. Shares of CE have rallied around 22.6% over a year.
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Univar Solutions (UNVR) Up 36% YTD: What's Driving the Stock?
Univar Solutions Inc.'s shares have risen 36.3% year to date, outperforming its industry’s growth of 13.3%. It has also topped the S&P 500’s 21.6% rise over the same period.
Let’s dive into the factors behind this Zacks Rank #2 (Buy) stock’s price appreciation.
What’s Favoring Univar?
Impressive results in the third quarter and upbeat prospects have contributed to the company’s share price increase. Its adjusted earnings of 62 cents per share in the quarter beat the Zacks Consensus Estimate of 43 cents. It generated net sales of $2,487.9 million, up 23.8% year over year. The top line beat the Zacks Consensus Estimate of $2,261.6 million.
Univar is benefiting from higher prices, strategic acquisitions, cost minimization and a robust liquidity position. The benefits of chemical price inflation and strong market demand will likely lead to a solid fourth-quarter performance.
Univar stands to gain from its market expansion and acquisition moves. The company is continuously seeking opportunities to enter new regions, reinforce product and service portfolio. It is also strengthening end-market capabilities through strategic buyouts. The acquisition of Nexeo Solutions has enhanced its capabilities and accelerated its ability to create significant value for customers, supplier partners, employees and shareholders. The integration of Nexeo is anticipated to bring in $25 million net synergies for this year. The company is on track to achieve an annual net synergy of $120 million (before tax) from Nexeo by first-quarter 2022.
Additionally, the company made noteworthy strides in the third quarter in its previously announced Streamline 2022 (S22) Program, designed to boost operational agility and sales. Univar looks to improve adjusted EBITDA margins by 9% by the end of 2022 and expects to reduce leverage to 2.6x or lower by the end of 2021.
The company also has a solid liquidity position. At the end of third-quarter 2021, its liquidity was nearly $1 billion, including around $221 million cash-in-hand and additional availability under committed, asset-based credit facilities. The company also expects strong liquidity and the majority of its debt obligations to mature in 2026 and beyond. Long-term debt was $2,198.8 million at the end of third-quarter 2021, falling 17.4% year over year. UNVR’s strong liquidity should allow it to meet its short-term debt obligations. It also announced a $500 million share repurchase program owning to its strong financial performance.
Univar remains committed to cost-cutting, expense management and productivity actions that are helping it minimize operational costs and boost margins. It is taking a number of actions to reduce costs in the wake of the pandemic, including a reduction in travel and other discretionary spending.
Moreover, Univar raised its guidance for adjusted EBITDA to the band of $770-$780 million from the previously expected $705-$725 million for 2021. Its adjusted EBITDA was $635.8 million in 2020.
Earnings estimates for Univar have also been going up over the past three months. The Zacks Consensus Estimate for 2021 earnings has increased 9% over the same time frame. The favorable estimate revisions instill investors’ confidence in the stock.
Other Stocks to Consider
Some other top-ranked stocks from the basic materials space are Nutrien Ltd. (NTR - Free Report) and AdvanSix Inc. (ASIX - Free Report) , sporting a Zacks Rank #1 (Strong Buy) and Celanese Corporation (CE - Free Report) , carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien has an expected earnings growth rate of 212.2% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 12.9% upward over the past 60 days.
Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It delivered a trailing four-quarter earnings surprise of roughly 73.5%, on average. NTR has rallied around 35% in a year.
AdvanSix has an expected earnings growth rate of 197% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 14.1% upward over the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in each of the four trailing quarters, with an earnings surprise of 47%, on average. ASIX’s shares have surged 157.4% over a year.
Celanese has an expected earnings growth rate of 139.7% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 9.1% upward over the past 60 days.
Celanese beat the Zacks Consensus Estimate for earnings in each of the four trailing quarters and pulled off an earnings surprise of 12.7%, on average. Shares of CE have rallied around 22.6% over a year.