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Here's Why Versum Materials Stock is a Good Investment Pick

Zacks Equity Research

Versum Materials Inc.’s VSM impressive third-quarter fiscal 2017 (ended Jun 30, 2017) results, solid future prospects and acquisition initiatives make it a solid bet for investors now.

It currently sports a Zacks Rank #1 (Strong Buy).

In the last three months, the company’s shares have yielded 21.6% return, outperforming 1.4% decline of the industry it belongs to.

Why the Upgrade?

We believe Versum Materials’ impressive performance in third-quarter fiscal 2017, with a positive earnings surprise of 18.18% and sound growth prospects have created positive momentum for the stock. In the fiscal third quarter, the company’s profitability increased year over year on the back of higher volume growth in Delivery Systems & Services and Materials segments, improvement in operational efficiency and lower tax rate.

We believe that Versum Materials is poised to gain from the strengthening semiconductor industry and initiatives to provide new and improved products to customers. For fiscal 2017, the company raised its sales guidance to $1,090-$1,120 million from the earlier projected range of $1,020-$1,065 million. Adjusted earnings before interest, tax, depreciation and amortization are predicted to come in within $365-$375 million versus $340-$355 million expected earlier.

Additionally, Versum Materials’ acquisition of Dynaloy, LLC from Eastman Chemical Company EMN is in sync with its inorganic growth strategies. Dynaloy specializes in providing formulated cleaning solutions for use in the semiconductor and specialty manufacturing industries. The acquired assets will be accretive to earnings per share in the initial year of operations. Moreover, the company’s agreement with NuMat Technologies, to offer the latter’s ION-X line of products within its Materials segment, will work in its favor.

Investors are optimistic about Versum Materials’ future prospects, as evident from the positive revisions in earnings estimates for the stock. Over the last 60 days, the Zacks Consensus Estimate for the company increased 7.3% to $1.91 for 2017 and 9.3% to $2.11 for 2018.

Versum Materials Inc. Price and Consensus

Versum Materials Inc. Price and Consensus | Versum Materials Inc. Quote

Other Stocks to Consider

Versum Materials has a market capitalization of approximately $4.1 billion. Other stocks worth considering in the industry include Kraton Corporation KRA and AdvanSix Inc. ASIX. While Kraton Corporation sports a Zacks Rank #1, AdvanSix carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kraton Corporation’s earnings estimates for 2017 and 2018 improved over the last 60 days. Also, the company pulled off an average positive earnings surprise of 16.54% for the last four quarters.

AdvanSix’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company delivered better-than-expected results in second-quarter 2017, with an earnings beat of 25.76%.

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Eastman Chemical Company (EMN) : Free Stock Analysis Report
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