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Element Solutions (ESI) Q4 Earnings Meet, Sales Lag Estimates

Anindya Barman
In the latest trading session, Advanced Micro Devices (AMD) closed at $28.86, marking a -1.37% move from the previous day.

Element Solutions Inc ESI recorded net loss from continuing operations (as reported) of $14.2 million or 5 cents per share in fourth-quarter 2018, narrower than a loss of around $18.8 million or 6 cents a year ago.

Adjusted earnings for the reported quarter were 2 cents per share, in line with the Zacks Consensus Estimate.

The specialty chemicals company raked in net sales of $478 million for the quarter, down roughly 2% year over year. It also lagged the Zacks Consensus Estimate of $480 million. Organic net sales, barring the impact of currency changes, specific pass-through metal prices and acquisitions, rose 1%.

Adjusted EBITDA for the reported quarter came in at $99 million, down 5% year over year. Adjusted EBITDA fell 1% on a constant currency basis.

FY18 Results

For 2018, net loss from continuing operations (as reported) was $77 million or 27 cents per share, lower than net loss $191.8 million or 68 cents per share recorded in 2017.

Net sales for the year rose roughly 4% year over year to $1,961 million. Organic net sales went up 3%. The company achieved organic growth notwithstanding a difficult macro environment.

Segment Highlights

Net sales from the Electronics segment fell 4% year over year to $282.1 million. Organic net sales dipped 1%. Adjusted EBITDA for the division was $58.3 million, down 8%.

Net sales from the Industrial & Specialty unit rose 1% to $196.3 million. Organic net sales rose 4%. Adjusted EBITDA for the segment was $40.6 million, up 1%.

Financial Position

Element Solutions exited 2018 with cash and cash equivalents of $233.6 million, down roughly 10% year over year. Long-term debt at the end of the year was $5,350.7 million, down around 2%.

Outlook

The company reiterated its earlier guidance for 2019. It expects organic net sales growth of 1-3% and adjusted EBITDA growth (in constant currency) of 5-8% for 2019. The company expects foreign exchange headwinds of roughly 2% to net sales and around $15 million to adjusted EBITDA factoring in end-2018 exchange rates.

Element Solutions also expects adjusted earnings for the year to be 82-87 cents per share, including the impact of lower share count as a result of its repurchase of 37 million shares on Feb 8, 2019.

Zacks Rank & Stocks to Consider

Element Solutions 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 8.8% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have shot up around 128% 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 35% 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 7% in the past year.

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