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Axalta (AXTA) Updates View on Supply Chain & Input Constraints

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Axalta Coating Systems Limited AXTA recently announced an update for the third quarter and full-year 2021 financial guidance keeping in view the ongoing supply chain issues its Mobility customers are witnessing as well as continued raw material inflation and supply chain and logistics constraints impacting the coatings industry.

Axalta forecasts net sales for the third quarter to decline roughly $40 million compared with volume levels expected in the earlier-announced outlook. It expects adjusted EBIT between $130 million and 140 million, considering a positive business mix, ongoing price increases and continued cost actions. The earlier guidance for Q3 adjusted EBIT was $138 million at the midpoint of the range. Axalta is withdrawing its earlier-announced guidance for full-year 2021 due to the uncertainty related to these factors and expected financial impacts during the fourth quarter.

Since Jul 26, when Axalta announced its third quarter and full-year 2021 guidance, net sales volumes have continued to be impacted by customer supply chain disruptions, especially in the Light Vehicle end-market.

Industry forecasts for light vehicle production assume these challenges to persist into 2022. Axalta now projects global production impacts to total roughly 11 million units for 2021 compared with the previous assumption of 7 million units. Recent weather events in the Southeast U.S. along with global raw material supply and logistics constraints also led to persistent cost inflation and supply constraints in excess of the same anticipated in the earlier guidance.

Notwithstanding the impact of Mobility customer component shortages and supply chain challenges, underlying demand remains strong in the Performance Coatings end-markets. Inventory on hand in customer channels remains at lower-than-normal levels. Axalta expects the same to support net sales recovery as pandemic-related impacts and supply chain dynamics ease over time.

The company expects net sales volumes in the Refinish and Industrial end-markets to be consistent with the earlier guidance. On a consolidated basis, it believes that strong global demand, aided by active growth initiatives and price-hike actions to address inflationary pressures, will support a continued recovery in net sales and profit during 2022 and beyond.

Shares of Axalta have gained 32.2% in the past year compared with a 21.7% rise of the industry.

Zacks Investment Research
Zacks Investment Research


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Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Nucor Corporation NUE, The Chemours Company CC and Olin Corporation OLN.

Nucor has a projected earnings growth rate of around 534.4% for the current year. The company’s shares have surged 118.1% in a year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected earnings growth rate of around 86.4% for the current year. The company’s shares have gained 33.8% in the past year. It currently flaunts a Zacks Rank #1.

Olin has an expected earnings growth rate of around 639.3% for the current fiscal. The company’s shares have surged 302% in the past year. It currently carries a Zacks Rank #2 (Buy).


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