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Element Solutions (ESI) Q1 Earnings Top, Sales Lag Estimates

Zacks Equity Research

Element Solutions Inc ESI recorded net loss from continuing operations of $3.5 million or 2 cents per share in first-quarter 2019, narrower than a loss of $8.9 million or 4 cents in the year-ago quarter.

Adjusted earnings per share (EPS) for the quarter were 20 cents, which surpassed the Zacks Consensus Estimate of 18 cents.

The specialty chemicals company generated net sales of $459.8 million, down 6.6% year over year. The figure lagged the Zacks Consensus Estimate of $463 million. Organic net sales, barring the impact of currency changes, specific pass-through metal prices and acquisitions, fell 3%.

Adjusted EBITDA came in at $99 million, down 5% year over year. Adjusted EBITDA rose 1% on a constant-currency basis.

Per management, weakness in end-markets from second-half 2018 persisted in the reported quarter as reflected in the financial results.

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Segment Highlights

Net sales in the Electronics segment fell 8% year over year to $266 million. Organic net sales dipped 5%. Adjusted EBITDA amounted to $56 million, down 6%.

Net sales in the Industrial & Specialty unit fell 5% to $194 million. Organic net sales were flat. Adjusted EBITDA in the segment was $42 million, down 4%.

Financial Position

As of Mar 31, 2019, Element Solutions had cash and cash equivalents of $230.4 million, down roughly 44.9% year over year. Long-term debt was $1,516.5 million at the end of the first quarter.

Outlook

The company reiterated previous guidance for 2019. It expects adjusted EPS in the range of 82-87 cents per share. Adjusted EBITDA growth is projected in the band 5-8% at constant currency. The company expects flat to 2% organic net sales growth.

Price Performance

Shares of Element Solutions have gained 3.4% in a year’s time compared with the industry’s 7.1% rise.

Zacks Rank & Key Picks

Element Solutions currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Sandstorm Gold Ltd SAND, Israel Chemicals Ltd. ICL and AngloGold Ashanti Limited AU, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sandstorm Gold has an expected earnings growth rate of 200% for 2019. The company’s shares have gained 10.9% in the past year.

Israel Chemicals has an expected earnings growth rate of 13.5% for the current year. The company’s shares have appreciated 22% in a year’s time.

AngloGold has an expected earnings growth rate of 86.8% for 2019. Its shares have surged 36.6% in a year’s time.

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