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Ashland (ASH) Shares Up 12% YTD: What's Driving the Stock?

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Shares of Ashland Global Holdings Inc. (ASH - Free Report) have popped around 12% so far his year. The company has also significantly outperformed its industry’s growth of a paltry 0.7% to over the same time frame.  

Ashland, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $5 billion. Average volume of shares traded in the last three months was around 799.7K. Ashland has an expected long-term earnings per share growth rate of 10%.

Let’s take a look into the factors that are driving this chemical company.


Driving Factors

Forecast-topping second-quarter fiscal 2018 results, upbeat outlook, dividend hike and strategic initiatives have contributed to the rally in Ashland’s shares. The company’s adjusted earnings of $1.06 per share for the fiscal second quarter outstripped the Zacks Consensus Estimate of 84 cents. Revenues climbed 21% year over year to $974 million, also topping the Zacks Consensus Estimate of $960 million.

Ashland raised its adjusted earnings guidance for fiscal 2018 to $3.30-$3.50 per share from $2.90-$3.10 expected earlier. It expects to generate free cash flows of more than $220 million in fiscal 2018, which remains unchanged from the prior guidance. The company projects adjusted earnings in the range of 95 cents to $1.05 per share for third-quarter fiscal 2018.

The Zacks Consensus Estimate for earnings for fiscal 2018 reflects an expected year-over-year growth of around 41%. Moreover, earnings are expected to register a roughly 14.6% growth in fiscal 2019.

Ashland’s board, last month, raised its quarterly cash dividend by 11% to 25 cents per share. The dividend is payable Jun 15, 2018, to stockholders of record at the close of business on Jun 1.

Ashland is exploring strategic alternatives for its Composites segment, as well as for the butanediol (BDO) manufacturing facility in Marl, Germany, and associated merchant Intermediates and Solvents products. The move is likely to benefit the company by focusing on its portfolio of Specialty Ingredients.

Moreover, Ashland should also gain from the appropriate pricing actions in response to raw material cost inflation. The company increased prices of selective products, including BDO and derivatives prices. The move is driven by sustained rise in the costs of major raw materials.

Stocks to Consider

Stocks worth considering in the basic materials space include Westlake Chemical Corporation (WLK - Free Report) , The Chemours Company (CC - Free Report) and Celanese Corporation (CE - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 79% over a year.

Chemours has an expected long-term earnings growth rate of 15.5%. The company’s shares have gained around 26% in a year.

Celanese has an expected long-term earnings growth rate of 8.9%. Its shares have rallied roughly 30% over a year.

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