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Why Is Element Solutions (ESI) Up 0.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Element Solutions (ESI - Free Report) . Shares have added about 0.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Element Solutions' Q2 Earnings Beat, Sales Lag Estimates

Element Solutions recorded net income from continuing operations of $14.7 million or 6 cents per share in second-quarter 2019 against a net loss of $49.6 million or 17 cents in the year-ago quarter.

Adjusted earnings per share (EPS) of 21 cents surpassed the Zacks Consensus Estimate of 20 cents.

The company generated net sales of $456.7 million, down nearly 9% year over year. The figure lagged the Zacks Consensus Estimate of $471 million. Organic net sales, barring the impact of currency changes, specific pass-through metal prices and acquisitions, fell 6%.

Adjusted EBITDA came in at $101 million, down 8% year over year. Adjusted EBITDA fell 4% on a constant-currency basis.

Per management, end-markets were impacted by headwinds in automotive and electronics, especially in Asia.

Segment Highlights

Net sales in the Electronics segment fell 9% year over year to $267.9 million. Organic net sales dipped 6%. Adjusted EBITDA amounted to $60.4 million, down 7% year over year.

Net sales in the Industrial & Specialty unit fell 8% to $188.8 million. Organic net sales declined 5%. Adjusted EBITDA in the segment was $40.1 million, down 10% year over year.

Financial Position

At the end of second quarter, Element Solutions had cash and cash equivalents of $247.6 million, down roughly 44.6% year over year. Long-term debt was $1,515.3 million at the end of the second quarter.

Outlook

The company updated its guidance for 2019. It expects adjusted EPS in the range of 83-86 cents per share compared with 82-87 cents expected earlier.

Adjusted EBITDA growth is now projected in the band of 2-5% at constant currency, down from 5-8% expected earlier. The company expects 1-3% organic net sales growth compared with previous projection of flat to 2% growth.
 

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 -6.67% due to these changes.

VGM Scores

Currently, Element Solutions has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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. Notably, Element Solutions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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