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Ashland (ASH) Shares Up 15% YTD: What's Driving the Stock?

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Shares of Ashland Global Holdings Inc. (ASH - Free Report) have gained 14.7% year to date, outperforming the industry’s 4.2% decline.



The company has a market cap of roughly $5.1 billion. Average volume of shares traded in the past three months was around 574.6K.  

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

Driving Factors

Upbeat outlook, appropriate pricing actions, focus on improving asset utilization and cost-management initiatives have contributed to the gain in Ashland’s shares.

Ashland delivered a profit of $9 million or 15 cents per share in the fourth quarter of fiscal 2018 (ended Sep 30, 2018), against a loss of $58 million or 92 cents in the year-ago quarter. Net income and sales for fiscal 2018 also rose year over year.

The company expects adjusted earnings per share (EPS) in the range of $4.20-$4.40 for fiscal 2019. Moreover, it also expects adjusted EPS for first-quarter fiscal 2019 in the range of 55-65 cents per share, which reflects an increase from 42 cents in the year-ago quarter.

Ashland is benefiting from strong operational performance and appropriate pricing actions in response to raw material cost inflation are supporting margins. The company is also gaining from actions to boost premium mix as well as focus on improving asset utilization and cost management. All these contributed to a strong growth in adjusted EBITDA margins in fiscal 2018.

Earlier this year, Ashland declared a program to eliminate $120 million of existing corporate and Specialty Ingredients unit’s selling, general and administrative (SG&A) costs as well as manufacturing facility-related expenses. The company has already received $20 million in run-rate saving at the end of September and is likely to achieve $120 million of total run rate savings by the end 2019. It expects to generate free cash flow of around $230 million in fiscal 2019.

Moreover, Ashland recently agreed to divest its Composites unit and the butanediol (“BDO”) manufacturing facility in Marl, Germany, to London-based INEOS Enterprises in a deal worth around $1.1 billion. The move will enable the company to focus on its portfolio of Specialty Ingredients.

 

Zacks Rank & Other Stocks to Consider

Ashland currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space include CF Industries Holdings, Inc. (CF - Free Report) , Methanex Corporation (MEOH - Free Report) and The Mosaic Company (MOS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CF Industries has an expected long-term earnings growth rate of 6%. The company’s shares have gained 20.4% in the past year.

Methanex has an expected long-term earnings growth rate of 15%. Its shares have gained 7.5% in a year’s time.

Mosaic has an expected long-term earnings growth rate of 7%. The company’s shares have surged 49.1% in the past year.

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