Ashland (ASH) Provides Key Updates on Q3 and FY23 Outlook
Ashland Inc. ASH has released its updates on preliminary fiscal 2023 third-quarter financial results and the outlook for the fiscal year. The company faces significant challenges due to customer de-stocking across multiple markets and ongoing macroeconomic uncertainty. In response, the company has implemented internal inventory-control measures and plans to take further cost-reducing actions while focusing on long-term growth opportunities.
Projected Preliminary Q3 Financial Results
Ashland anticipates sales for the third quarter to range between $545 million and $550 million, indicating a decline of approximately 15% compared to the prior-year period. Lower volumes resulting from customer de-stocking are the primary driver of this decline, partly offset by favorable pricing. Each of the company's reportable segments is expected to report sales decreases.
The projected adjusted EBITDA for the quarter is in the range of $130-$135 million, implying a decrease of approximately 22%-25% year over year. This decline is attributed to lower sales volumes and reduced cost absorption resulting from internal inventory-control measures. Ashland foresees ongoing free cash flow generation between $90 million and $110 million during the quarter.
Share Repurchase Authorization
Ashland's board has approved a new $1 billion evergreen share repurchase authorization, replacing the previous $500 million authorization. The company had already repurchased around $300 million of its outstanding shares under the previous authorization since September 2022.
Fiscal 2023 Outlook
Given the persistent customer de-stocking, macroeconomic uncertainty and limited visibility into global consumer demand, Ashland has adjusted its financial outlook for fiscal year 2023. If the current de-stocking dynamics continue throughout the fiscal fourth quarter, the company projects sales to be around $2.2 billion and adjusted EBITDA to be approximately $500 million.
The company acknowledges the unprecedented impact of customer de-stocking across supply chains and the resulting challenges. While true end-market demand remains difficult to gauge, Ashland remains committed to its longer-term growth objectives. The company aims to focus on controllable factors to maximize near-term performance, allocate capital wisely and prioritize innovation-driven growth opportunities.
The company has lost 18.6% in the past year against the industry’s 13.4% rise in the same period.
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Zacks Rank & Key Picks
Ashland currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the basic materials space include L.B. Foster Company FSTR, carrying a Zacks Rank #1 (Strong Buy), and Koppers Holdings Inc., KOP and Linde Plc LIN, carrying a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for L.B. Foster’s current-year earnings is pegged at 53 cents per share, indicating year-over-year growth of 112.5%. The company’s shares have gained around 5.8% over the past year. FSTR beat the Zacks Consensus Estimate in all the last four quarters. It delivered a trailing four-quarter earnings surprise of 140.5%, on average.
Kopperscurrently carries a Zacks Rank #2.The consensus estimate for current-year earnings for KOP is currently pegged at $4.40, implying year-over-year growth of 6.3%. Koppers’shares have rallied roughly 44.4% in the past year.
The Zacks Consensus Estimate for Linde’s current-year earnings has been revised 4.4% upward in the past 60 days. LIN beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 6.9%. The company’s shares have gained 28.7% in the past year.
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