Q4 Earnings Preview for Ashland Global (ASH)

in INVESTING IDEAS by

Ashland Global Holdings Inc. (NYSE:ASH) is scheduled to report Q4 earnings results on November 4, 2019. The company is expected to report earnings of $0.95/share on revenue of $643 million. The consensus earnings per share (EPS) of $0.95/share is based on a poll of 12 analysts and represents a decline of -2.5% over the same quarter last year when the company reported earnings of $0.97/share.

The revenue forecast of $643 million based on a poll of 10 analysts implies a year-over-year (YoY) decline of -32.7%. Last year the company reported $956 million in revenue for the quarter.

Expected to report EPS decline of -$0.02/share for Q4, 2019
Metric Expected Prior Year YoY Change
Revenue $642.96 $956.00 -32.7%
EPS $0.95 $0.97 -2.5%

 

You can find the latest investor presentation for Ashland here: Management Presentation. On page 9, the company provides an update on Outlook for Fiscal Year 2019. Key Drivers listed are as follows:

  • Adjusted EPS and Specialty Ingredients’ Adjusted EBITDA outlook reduced primarily due to:
    • Lower-than-expected Q3 results due to weak sales in the Personal Care and Adhesives end markets
    • Expectation that Q4 results will also be impacted by the current sluggish global demand environment
  • Expect to see returning sales and EBITDA growth momentum in fiscal year 2020 driven by:
    • New product introductions
    • Lapping the impact of currency and the Colgate-Gantrez reformulation in the fiscal first quarter
    • Realize ~$25 million benefit within Specialty Ingredients from the current cost reduction program
    • Pace of earnings growth will be a function of the rate and timing of market demand recovery
  • Updated free cash flow1 outlook inclusive of an estimated $60 million of separation and restructuring-related costs vs. an estimated $40 million in the Prior Outlook

The chart below outlines the company’s historical revenue performance:

Ashland Revenues.jpg

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, missed 1 quarter, and met expectations 2 quarters.

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q3, 2019 $0.77 $0.77 0.0% Meet
Q2, 2019 $0.85 $0.83 -1.9% Missed
Q1, 2019 $0.12 $0.14 16.7% Beat
Q4, 2018 $0.95 $0.97 2.1% Beat
Q3, 2018 $1.02 $1.13 10.8% Beat
Q2, 2018 $0.86 $1.06 22.7% Beat
Q1, 2018 $0.42 $0.42 0.0% Meet
Q4, 2017 $0.70 $0.78 11.8% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2019, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-07-30 $79.46 $79.48 0.0% Increase
2019-04-30 $79.92 $75.63 -5.4% Decline
2019-02-05 $76.35 $78.38 2.7% Increase
2018-11-06 $77.06 $83.97 9.0% Increase

 

Fundamentals And Technical Analysis

Ashland Global is currently trading at $78.85/share, up 0.6% for the day. The company is trading at approximately 93.0% of its 52-week high of $84.81/share. The company’s stock price is down -0.8% since the last earnings report and down -0.1% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 58.62 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 58.6x and a forward P/E multiple of 28.2x. Ashland Global’s current share price also implies a price-to-book (P/B) multiple of 1.5x. The following table summarizes some other key fundamental ratios:

Data as of November 17, 2019
Metric Value
Last Fiscal Period FY2019.Q3
Period End Date June 30, 2019
Stock Price (Current) $78.85
P/E Ratio 58.6x
P/E Ratio (Fwd) 28.2x
PEG Ratio 1.1
Total Debt to Capital (%) 35.5%
Levered Free Cash Flow $94 million
Enterprise Value / EBITDA 11.4x

Company Profile: Ashland Global Holdings Inc.

Ashland Global Holdings Inc. is a mid-cap stock with a market capitalization of $4.772 billion and a total enterprise value of $7.247 billion. The company operates in the Materials sector and Chemicals industry.

Ashland Global Holdings Inc. provides specialty chemical solutions worldwide.

The company’s Specialty Ingredients segment offers products, technologies, and resources for solving formulation and product-performance challenges. It provides solutions using natural, synthetic, and semisynthetic polymers derived from cellulose ethers, vinyl pyrrolidones, acrylic polymers, polyester and polyurethane-based adhesives, and plant and seed extracts. This segment offers its solutions for the pharmaceutical companies; makers of personal care products, food, and beverages; makers of nutraceuticals and supplements; manufacturers of paint, coatings, and construction materials; packaging and converting markets; and oilfield service companies.

Its Composites segment manufactures and sells a range of unsaturated polyester and vinyl ester resins, gelcoats, and low-profile additives for the reinforced plastics industry; and molten maleic anhydride for the manufacture of various products, such as unsaturated polyester resins, copolymers, lubricating oil additives, alkenyl succinic anhydrides, malic acid, fumaric acid, and derivative chemicals. This segment serves manufacturers of residential and commercial building products, industrial product specifiers and manufacturers, wind blade manufacturers, pipe manufacturers, automotive and truck original equipment manufacturers and suppliers, boat builders, and chemical producers.

The company’s Intermediates and Solvents segment produces 1,4 butanediol and related derivatives, including tetrahydrofuran and n-methylpyrrolidone that are used as chemical intermediates in the production of engineering polymers and polyurethanes, as well as specialty process solvents used in electronics, pharmaceuticals, water filtration membranes, and others.

The company was formerly known as Ashland Inc. and changed its name to Ashland Global Holdings Inc. in September 2016. Ashland Global Holdings Inc. was founded in 1924 and is headquartered in Covington, Kentucky.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.