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Innophos (IPHS) Earnings Miss Estimates in Q3, Sales Rise Y/Y

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Innophos Holdings, Inc. (IPHS - Free Report) posted a profit of $14 million or 71 cents per share in third-quarter 2018, up from a profit of $11 million or 58 cents a year.
Barring one-time items, the company’s adjusted earnings per share (EPS) were 58 cents per share in the quarter, which trailed the Zacks Consensus Estimate of 64 cents.

Net sales totaled $197 million in the reported quarter, up around 7% year over year on contribution from acquisitions, a stabilized base portfolio and pricing actions.

Innophos Holdings, Inc. Price, Consensus and EPS Surprise


Segment Highlights

Revenues at the FHN segment climbed 17% year over year to $115 million in the third quarter, driven by contribution from acquisitions.

The Industrial Specialties (IS) division recorded revenues of $66 million in the quarter, down 3% year over year. Volumes were down 9%, offset by increase in selling price that rose 6%.

Other sales fell 10% year over year to $16 million on lower co-product sales.

Innophos ended the quarter with cash and cash equivalents of $23 million, down 29.4% year over year. Long-term debt was $345 million, up 17% year over year.  Net cash provided by operating activities for the first nine months of 2018 was $30.8 million, a roughly 34% year-over-year decline.


Innophos expects year-over-year revenue growth of 10-12% in 2018 which equates to a range of $791-$806 million.

The company envisions adjusted EBITDA growth of 3-7% year over year, which equates to a range of $123-$128 million. Earnings in 2018 are likely to be affected by strategic value chain repositioning transition costs. In the fourth quarter, the company expects seasonality to impact sales. Moreover, the company anticipates effective tax rate to operate in the range of 29-31%.

Innophos’ fourth-quarter free cash flow is expected to benefit from its earlier announced plans to complete a sale leaseback transaction and Nutrien contractual payment of $20 million.
By the end of 2019, the company’s multi-faceted value chain repositioning and manufacturing optimization program are forecast to deliver adjusted EPS improvement of 10%, representing an estimated run rate of 25-27 cents a share.

Price Performance

Innophos’ shares are down 32.5% in a year, underperforming the loss of 15.4% recorded by the industry.


Zacks Rank and Stocks to Consider

Innophos currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the basic materials space are CF Industries Holdings, Inc. (CF - Free Report) , KMG Chemicals, Inc. and The Mosaic Company (MOS - Free Report) .

CF Industries has an expected long-term earnings growth rate of 6% and a Zacks Rank #1 (Strong Buy). The company’s shares have gained 26.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

KMG Chemicals has an expected long-term earnings growth rate of 28.5% and a Zacks Rank #2 (Buy). Its shares have risen 43.2% in a year’s time.

Mosaic has an expected long-term earnings growth rate of 7% and a Zacks Rank #2. The company’s shares have rallied 41.9% in the past year.

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