Q3 Earnings Preview for Element Solutions (NYSE:ESI)

in EARNINGS/INVESTING IDEAS by

Element Solutions Inc (NYSE:ESI) is scheduled to report Q3 earnings results after markets close for trading on October 27, 2020.

The company is expected to report earnings of $0.20/share on revenue of $435.6 million. The consensus earnings per share (EPS) of $0.20/share is based on a poll of 9 analysts and represents a decline in eps of −21.5% over the same quarter last year, when the company reported earnings of $0.26/share.

The revenue forecast of $435.6 million based on a poll of 6 analysts implies a year-over-year (YoY) decline in revenue of −6.3%. Last year the company reported $464.7 million in revenue for the quarter.

Expected to report EPS contraction of −21.5% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $435.63 $464.70 −6.3%
EPS $0.20 $0.26 −21.5%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, missed 1 quarter, and met expectations 1 quarter.

What are your expectations from Element Solutions Inc for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.14 $0.18 29.4% Beat
Q1, 2020 $0.20 $0.25 24.9% Beat
Q4, 2019 $0.20 $0.22 11.3% Beat
Q3, 2019 $0.21 $0.26 21.8% Beat
Q2, 2019 $0.19 $0.21 9.2% Beat
Q1, 2019 $0.19 $0.20 8.1% Beat
Q4, 2018 $0.02 $0.02 0% Met
Q3, 2018 $0.05 $0.04 −23.5% Missed

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, 2020, the stock price reacted by falling −2.4%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 4, 2020 $11.44 $11.17 −2.4% Decline
April 30, 2020 $9.88 $9.99 1.1% Increase
February 26, 2020 $10.67 $10.35 −3.0% Decline
November 7, 2019 $11.48 $11.73 2.2% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.82, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.82 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Element Solutions Inc is currently trading at $12.32/share, up 0.2% for the day. The company is trading at approximately 96.7% of its 52-week high of $12.74/share. The company’s stock price is up 10.3% since the last earnings report and up 1.0% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 66.43 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:ESI Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 38.82 and a forward P/E multiple of 14.45.

Element Solutions Inc’s current share price also implies a price-to-book (P/B) multiple of 1.42. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $12.32
P/E Ratio 38.8x
P/E Ratio (Fwd) 14.5x
PEG Ratio 0.3
Total Debt / Total Capital 34.0%
Levered Free Cash Flow $215.9 million
EV / EBITDA 11.1x

Finbox

Element Solutions Inc is a mid-cap stock with a market capitalization of $3.067 billion and a total enterprise value of $4.405 billion. The company operates in the Materials sector and the Chemicals industry.

Element Solutions Inc produces and sells specialty chemical products the United States, China, and internationally. The company operates in two segments, Electronics and Industrial & Specialty. The Electronics segment researches, formulates, and delivers specialty chemicals and materials for various types of electronics hardware products. This segment offers electronic assembly materials; circuitry solutions comprising circuit board metallization products, circuit formation products, and electronic materials; and semiconductor solutions. This segment primarily serves mobile communications, computers, automobiles, and aerospace equipment industries. The Industrial & Specialty segment provides industrial solutions, which include chemical systems that protect and decorate metal and plastic surfaces; graphics solutions that comprise consumable chemicals that enable printing image transfer on flexible packaging materials; and energy solutions, which consist of chemistries used in water-based hydraulic control fluids for offshore deep-water drilling. This segment’s products include electroless nickel products, plating products, pre-treatment and cleaning solutions, functional conversion coatings, hard-coated films, and water treatment products; solid sheet printing elements and liquid imaging products; and offshore fluids. This segment serves the aerospace, automotive, construction, consumer electronics, consumer packaged goods, and oil and gas production end markets. The company was formerly known as Platform Specialty Products Corporation and changed its name to Element Solutions Inc in January 2019. Element Solutions Inc was founded in 1922 and is based in Fort Lauderdale, Florida.

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