PQ Q3 Earnings: Is NYSE:PQG Cheap at 1.0x Price/Book?

in EARNINGS/INVESTING IDEAS by

PQ Group Holdings Inc. (NYSE:PQG) is scheduled to report Q3 earnings results on October 30, 2020.

The company is expected to report earnings of $0.24/share on revenue of $380.5 million. The consensus earnings per share (EPS) of $0.24/share is based on a poll of 9 analysts and represents a decline in eps of −32.2% over the same quarter last year, when the company reported earnings of $0.36/share.

The revenue forecast of $380.5 million based on a poll of 6 analysts implies a year-over-year (YoY) decline in revenue of −10.2%. Last year the company reported $423.8 million in revenue for the quarter.

Expected to report EPS contraction of −32.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $380.46 $423.80 −10.2%
EPS $0.24 $0.36 −32.2%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from PQ Group Holdings Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.18 $0.22 24.7% Beat
Q1, 2020 $0.10 $0.16 66.9% Beat
Q4, 2019 $0.09 $0.13 48.1% Beat
Q3, 2019 $0.28 $0.36 30.0% Beat
Q2, 2019 $0.23 $0.31 37.4% Beat
Q1, 2019 $0.10 $0.13 34.5% Beat
Q4, 2018 $0.13 $0.17 28.0% Beat
Q3, 2018 $0.24 $0.26 8.9% 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, 2020, the stock price reacted by falling −8.2%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 30, 2020 $13.36 $12.27 −8.2% Decline
May 5, 2020 $11.08 $10.96 −1.1% Decline
February 20, 2020 $15.17 $15.24 0.5% Increase
October 31, 2019 $16.40 $16.37 −0.2% Decline

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 −2.89, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.89 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

PQ Group Holdings Inc. is currently trading at $12.46/share, down −1.0% for the day. The company is trading at approximately 72.2% of its 52-week high of $17.26/share. The company’s stock price is up 1.5% since the last earnings report and down −1.5% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 62.30 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:PQG Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 27.36 and a forward P/E multiple of 16.47.

PQ Group Holdings Inc.’s current share price also implies a price-to-book (P/B) multiple of 0.96. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $12.46
P/E Ratio 27.4x
P/E Ratio (Fwd) 16.5x
PEG Ratio −1.5
Total Debt / Total Capital 53.3%
Levered Free Cash Flow $157.2 million
EV / EBITDA 8.8x

Finbox

PQ Group Holdings Inc. is a small-cap stock with a market capitalization of $1.695 billion and a total enterprise value of $3.567 billion. The company operates in the Materials sector and the Chemicals industry.

PQ Group Holdings Inc. provides specialty catalysts, materials, chemicals, and services in the United States, the Netherlands, the United Kingdom, and internationally. The company operates through four segments: Refining Services, Catalysts, Performance Materials, and Performance Chemicals. The Refining Services segment offers sulfuric acid recycling and end-to-end logistics services to produce alkylate; and virgin sulfuric acid for water treatment, mining, and industrial applications. The Catalysts segment provides silica catalysts and zeolite catalysts for producers and licensors of polyethylene and methyl methacrylate. The Performance Materials segment offers transportation safety microspheres for various binders, such as paint and epoxy coatings; and engineered glass materials, including solid and hollow microspheres and particles for uses, such as strengthening and light-weighting in plastics and polymer additives, cleaning and peening of metal surfaces, and conductivity or shielding in electronic applications. The Performance Chemicals segment offers sodium silicates for construction, cleaning, water treatment, pulp and paper, foundry and refractory, green tires, electronics, and refining catalysts; and specialty silicas for use as ingredients in personal care products, foods, edible oils, and beers, as well as industrial uses consisting of gloss control in coil, wood, general industrial leather, and other surface coating applications. This segment also provides other silicate derivatives, including metasilicates, spray dried silicates, and magnesium and potassium silicates for use in cleaning, specialty fertilizer, oil and gas, mining, paint, food, and cosmetic applications, as well as zeolites for use as builders for detergents and other applications, such as stabilizers for the production of polyvinylchloride applications. PQ Group Holdings Inc. was founded in 1831 and is headquartered in Malvern, Pennsylvania.

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