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AdvanSix (ASIX) Earnings Trail, Revenues Top Estimates in Q4

Anindya Barman
A Discount Retailer and a Small Cap That???s Growing Quickly.

AdvanSix Inc. ASIX logged a profit of $20.8 million or 68 cents per share in the fourth quarter of 2018, down roughly 71% from a profit of $72.4 million or $2.31 per share in the year-ago quarter. The results in the year-ago quarter include a tax benefit of roughly $53 million. Earnings for the reported quarter missed the Zacks Consensus Estimate of 77 cents.

Revenues rose roughly 4% year over year to $386.6 million in the quarter, aided by higher volumes and favorable market-based pricing. The figure also exceeded the Zacks Consensus Estimate of $362.3 million.

FY18 Results

Profits for full-year 2018 were $66.2 million or $2.14 per share, down roughly 55% from $146.7 million or $4.72 recorded in 2017.

Sales for the year rose around 3% year over year to around $1,515 million.

Volumes and Pricing

Sales volumes rose around 5% year over year in the reported quarter on the back of high utilization rates at the company’s manufacturing sites. Moreover, volumes in the year-ago quarter was affected by the unfavorable impact of a planned plant turnaround.

Overall pricing dipped 1% year over year, impacted by lower raw material pass-through pricing. Market-based pricing was 3% favorable as improved industry supply and demand dynamics in AdvanSix’s ammonium sulfate, nylon, and caprolactam product lines more than offset weakness in chemical intermediates.

Financials

AdvanSix ended 2018 with cash and cash equivalents of $9.8 million, down around 82% year over year. Cash flow from operating activities was $45.7 million in the reported quarter, up roughly 26% year over year. Cash flow from operating activities for 2018 was $173.4 million, up around 29% year over year. Free cash flow was $9.1 million for the fourth quarter (down 46% year over year) and $64.2 million for 2018 (up 33% year over year).

The company bought back 646,467 shares for around $18 million in the reported quarter. It also repurchased 1,191,749 shares for roughly $38 million in 2018.

Outlook

Moving ahead, AdvanSix expects improved financial and operational performance this year. The company is boosting higher value product mix and optimizing production output and expects to realize the benefits of its investments in high-return capital projects in second-half 2019.  AdvanSix also expects strong plant utilization rates to continue notwithstanding a more uncertain macro environment over the near term and persistent softness in North America acetone industry spreads.

The company expects capital spending for 2019 to be $140-$150 million. This includes high-return growth and cost saving projects and higher maintenance spending due to the scope and timing of planned plant turnarounds. AdvanSix also expects pre-tax income impact of planned plant turnarounds to be $35-$40 million for 2019.

Zacks Rank & Stocks to Consider

AdvanSix currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, Israel Chemicals Ltd. ICL and Franco-Nevada Corporation FNV.

Kirkland Lake Gold has an expected earnings growth rate of 20.9% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have surged around 127% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 10.8% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied around 28% over the past year.  

Franco-Nevada has an expected earnings growth rate of 11.2% for the current year and carries a Zacks Rank #2. Its shares have gained roughly 8% in the past year.

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