It has been about a month since the last earnings report for Element Solutions (ESI Quick QuoteESI - Free Report) . Shares have added about 12.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Element Solutions due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Element Solutions’ Q3 Earnings Surpass Estimates, Revenues Lag

Element Solutions recorded a loss of 13 cents per share in third-quarter 2023 against earnings of 22 cents in the year-ago quarter.

Adjusted earnings per share came in at 36 cents in the quarter, beating the Zacks Consensus Estimate of 34 cents.

The company generated net sales of $599.3 million, down 3% year over year. The figure missed the Zacks Consensus Estimate of $624.5 million. In the reported quarter, the company achieved robust sequential growth in adjusted EBITDA, primarily driven by a recovery in the electronics segment and expanding profit margins.

Segment Highlights

Net sales in the Electronics segment fell 6% year over year to $367 million in the reported quarter, with organic net sales down 5% from the previous year's reported figure. The figure fell short of our estimate of $388.8 million.

In the Industrial & Specialty segment, net sales declined 1% year over year to $232 million, with organic net sales dropping 1%. The figure was below our estimate of $245.2 million.

Financial Position

Element Solutions ended the quarter with cash and cash equivalents of $329.6 million, up 40.9% year over year. Long-term debt was $2,027.8 million at the end of the quarter, up 7.4% year over year.

Cash from operating activities was $87 million in the quarter. Free cash flow was $75 million.

Outlook

Element Solutions revised its adjusted EBITDA guidance to nearly $485 million for 2023.

It estimates full-year 2023 adjusted earnings per share of around $1.30. The company anticipates generating a free cash flow of about $265 million for 2023.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -8.57% due to these changes.

VGM Scores

At this time, Element Solutions has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Element Solutions has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Element Solutions is part of the Zacks Chemical - Specialty industry. Over the past month, PPG Industries (PPG Quick QuotePPG - Free Report) , a stock from the same industry, has gained 12%. The company reported its results for the quarter ended September 2023 more than a month ago.

PPG Industries reported revenues of $4.64 billion in the last reported quarter, representing a year-over-year change of +3.9%. EPS of $2.07 for the same period compares with $1.66 a year ago.

For the current quarter, PPG Industries is expected to post earnings of $1.49 per share, indicating a change of +22.1% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.3% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for PPG Industries. Also, the stock has a VGM Score of A.