Univar Inc. is slated to release third-quarter 2017 results ahead of the bell on Nov 3.

 

The chemical company logged a profit (on a reported basis) of $31.3 million or 22 cents per share in second-quarter 2017, down around 21.4% from a profit of $39.8 million or 29 cents per share a year ago. Barring one-time items, earnings came in at 34 cents per share in the quarter, beating the Zacks Consensus Estimate of 31 cents.

 

The company’s revenues dipped 0.7% year over year to $2,247 million in the quarter, missing the Zacks Consensus Estimate of $2,266 million.

 

The company has topped earnings estimates in two of the trailing four quarters, while missing in the other two with an average positive surprise of 4%.

Shares of Univar have lost 2.7% in the past six months underperforming the industry’s 16.3% gain.

 

 

Can the company surprise investors or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.

 

 

For the full year, Univar sees high-single digit growth in adjusted EBITDA. For third-quarter 2017, it expects adjusted EBITDA growth of high-single digits from previous year's third-quarter figure of $145.9 million.

 

Net sales for Univar’s USA segment for the third quarter is projected to witness a 2.9% rise from the second quarter as the Zacks Consensus Estimate for the third quarter is pegged at $1,225 million. Adjusted EBITDA is also expected to rise 7.6% sequentially as the Zacks Consensus Estimate is $99 million for the third quarter. 

 

Net sales for Univar’s Canada segment for the third quarter is projected to witness a 46.3% decline from the second quarter as the Zacks Consensus Estimate for the third quarter is pegged at $264 million. Adjusted EBITDA is also expected to decline 37.5% sequentially as the Zacks Consensus Estimate is $23 million for the third quarter. 

 

Moreover, the Zacks Consensus Estimate for net sales for the EMEA segment is expected to be $407 million for the third quarter, reflecting an estimated 12.3% decline on a sequential basis. Adjusted EBITDA is also expected to decline 3.6% sequentially as the Zacks Consensus Estimate is $35 million for the third quarter. 

 

The Zacks Consensus Estimate for net sales for the Rest of the World is expected to be $107 million for the third quarter, reflecting an estimated 7% rise on sequential basis. Adjusted EBITDA is also expected to increase 42.9% sequentially as the Zacks Consensus Estimate is $7 million for the third quarter. 

 

In the second quarter, revenues from the USA division fell around 1.8% year over year to $1.2 billion, as improvements in the company's sales force was largely offset by lower volumes. Gross profit rose 4.8% to $275.7 million in the reported quarter.

 

Revenues from the Canada segment went up around 1.4% to $492.4 million, driven by higher sales volumes, partly offset by changes in market and product mix resulting from a soft agricultural season. Gross profit rose roughly 11.4% to $67.5 million in the quarter.

 

The EMEA segment raked in sales of $463.7 million, up 0.8%, helped by mix enrichment and margin improvement actions that were partly offset by a decline in volume. Gross profit rose around 1.6% to $104.7 million, supported by favorable market mix and end market mix.

 

Sales from the Rest of World unit fell 4.4% to $99.8 million as a result of softer demand and sluggish economic conditions in Latin America. Gross profit was essentially flat year over year at $18.5 million.

 

Univar, earlier this year, outlined its long-term growth strategy and financial targets. The company announced that operational excellence, commercial greatness and “one Univar”, will spur sustainable growth.

 

According to Univar, the company is well-poised to create significant value through three powerful growth pathways that include increased market share, improved margins and market expansion. It is also focused on increasing value for its supplier partners, customers and shareholders.
  

 

 

Our proven model does not conclusively show that Univar is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

 

Zacks ESP: Earnings ESP for Univar is currently pegged at -34.78%. This is because the Most Accurate estimate is 15 cents while the Zacks Consensus Estimate is pegged at 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

 

Zacks Rank: Univar currently carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

 

 

Here are some companies in the basic materials space you can consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

 

Westlake Chemical Corporation (WLK Quick QuoteWLK - Free Report) has an Earnings ESP of +1.08% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Southern Copper Corporation (SCCO Quick QuoteSCCO - Free Report) has an Earnings ESP of +4% and flaunts a Zacks Rank #1.

 

CF Industries Holdings, Inc. (CF Quick QuoteCF - Free Report) has an Earnings ESP of +1.83% and carries a Zacks Rank #2.

 

 

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