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Ingevity Corporation (NGVT) Down 20.7% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Ingevity Corporation (NGVT). Shares have lost about 20.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ingevity Corporation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Ingevity's Earnings Beat Estimates in Q2, Sales Lag

Ingevity logged profits (attributable to stockholders) of $56.8 million or $1.34 per share in second-quarter 2019, up from $46.7 million or $1.10 a year ago.

Adjusted earnings per share for the quarter were $1.36, up from $1.11 a year ago. The results surpassed the Zacks Consensus Estimate of $1.35.

The company’s revenues rose roughly 14% year over year to $352.8 million in the quarter, but fell short of the Zacks Consensus Estimate of $365.7 million.

Adjusted EBITDA climbed roughly 21% year over year to $108.3 million in the quarter. While the chemical maker faced challenges from weaker industrial demand in the quarter, it gained from its inorganic and organic growth strategy and focus on driving margins and profitability.

Segment Review

Revenues from the Performance Chemicals division rose around 8% year over year to $229.7 million in the quarter. Revenues were driven by the addition of the engineered polymers product line through the acquisition of the Capa caprolactone business.

Revenues from the Performance Materials unit went up around 28% to $123.1 million, driven by strong sales to automotive customers in China. The growth was also supported by strong growth in sales of the company’s solutions geared to meet the U.S. EPA Tier 3 and California LEV III automotive emission regulations.

Balance Sheet

Ingevity ended the quarter with cash and cash equivalents of $53.3 million, down around 36% year over year. Long-term debt was $1,363.3 million, up around 87%.

Outlook

Ingevity reaffirmed its sales guidance of between $1.30 billion and $1.36 billion for 2019. It also backed its adjusted EBITDA guidance for the year in the band of $390-$410 million.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Ingevity Corporation has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ingevity Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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