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Ingevity (NGVT) Shares Up 17% YTD: What's Working in Favor?

Shares of Ingevity Corporation NGVT have shot up around 17% so far this year. The company has also outperformed its industry’s decline of roughly 8% over the same time frame. Moreover, the stock has trounced the S&P 500’s decline of 0.8% year to date.

Ingevity, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $3.5 billion and average volume of shares traded in the last three months was around 289.2K. It has an expected long-term earnings per share growth rate of 12%.


Let’s take a look into the factors that are driving this specialty chemical company.

What’s Driving NGVT?

Sustained earnings outperformance, strong execution, cost discipline and organic and inorganic initiatives have contributed to the growth story of Ingevity. The company is gaining from strong oilfield business recovery, growth in activated carbon demand and contributions of Georgia-Pacific pine chemicals acquisition.

Ingevity has an impressive earnings surprise history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this timeframe, the company delivered a positive average earnings surprise of 19.8%.

Ingevity, in October, increased the mid-point and narrowed the range for its 2018 guidance for adjusted EBITDA to $306-$314 million from $302-$314 million. The company reaffirmed its sales guidance of between $1.10 billion and $1.13 billion for the year.

Earnings estimates for 2018 for Ingevity have moved north over the past two months. Over this period, the Zacks Consensus Estimate for the current year has increased by around 3.5%. The Zacks Consensus Estimate for earnings for 2018 for Ingevity is currently pegged at $3.85 per share, reflecting an expected year-over-year growth of 49.2%.

Sales growth in the oilfield industry on the back of higher U.S. drilling and production is driving revenues in the company’s Performance Chemicals division. Moreover, sustained adoption of the company’s solutions geared to meet the U.S. EPA Tier 3 and California LEV III emission regulations is contributing to the growth in the Performance Materials unit. Ingevity is poised to benefit from an expected rise in activated carbon demand on the back of the anticipated early adoption of China’s new gasoline emissions standards (the China 6 national standard) by some municipalities and regions.

Moreover, Ingevity is benefiting from its buyout of Georgia-Pacific’s pine chemicals business. The acquisition contributed to strong growth in sales of the Performance Chemicals division in the third quarter. The acquisition is expected to create net synergies of roughly $11 million through manufacturing optimization, lower logistics costs and leveraged procurement costs.

Higher adoption of tall oil fatty acid (TOFA)-based products is also benefiting the Performance Chemicals segment. Healthy TOFA pricing is also providing support to the margins of the division.

Ingevity Corporation Price and Consensus


Ingevity Corporation Price and Consensus | Ingevity Corporation Quote

Stocks to Consider

Stocks worth considering in the basic materials space include Nexeo Solutions, Inc. NXEO, The Mosaic Company MOS and Cameco Corporation CCJ.

Nexeo has an expected earnings growth rate of 28.4% for the current fiscal year and carries a Zacks Rank #1 (Strong Buy). The company’s shares have gained 4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mosaic has an expected earnings growth rate of 75.2% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have gained 24% over the past year.

Cameco has an expected earnings growth rate of 66.7% for the current year and carries a Zacks Rank #2. The company’s shares have rallied 19% in the past year.

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