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Ingevity's (NGVT) Shares Up 25% in a Month: Here's Why

Anindya Barman

Shares of Ingevity Corporation NGVT have shot up around 25% in the past month. The company has also significantly outperformed its industry’s rise of roughly 6% over the same time frame.

Ingevity, a Zacks Rank #1 (Strong Buy) stock, has a market cap of roughly $4.8 billion and average volume of shares traded in the last three months was around 265K. The company has an expected long-term earnings per share growth rate of 12%, higher than the industry average of 10.7%.

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



 

What's Working in NGVT’s Favor?

Forecast-topping earnings performance in the fourth quarter and an upbeat outlook have contributed to the run-up in Ingevity’s shares. The company delivered strong fourth-quarter results on the back of increased volumes, better price and mix, and reduced raw materials costs. The company also benefited from the Georgia-Pacific pine chemicals acquisition.

Ingevity’s adjusted earnings per share for the quarter were $1.07, topping the Zacks Consensus Estimate of 78 cents. The company’s revenues rose roughly 21% year over year to $278.6 million in the quarter, also coming ahead of the Zacks Consensus Estimate of $262.4 million.

For full-year 2018, the company’s profits jumped roughly 34% year over year to $169.1 million or $3.97 per share. Net sales for the year went up around 17% year over year to $1,133.6 million, aided by increased selling prices.

Notably, Ingevity has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average positive earnings surprise being 22.8%.

Ingevity expects sales between $1.30 billion and $1.36 billion for 2019. Adjusted EBITDA for the year has been forecast in the band of $390 million to $410 million. The company expects revenues to increase roughly 18% and earnings to rise around 25% year over year at the mid-point of its guidance factoring in its acquisition of the Capa caprolactone business.

Ingevity is gaining from higher sales in oilfield industry, growth in activated carbon demand and significant synergy capture from Georgia-Pacific’s asset buyout.

Sales growth in the oilfield industry on the back of strong U.S. drilling is driving revenues in the company’s Performance Chemicals division as witnessed in the fourth quarter. Sales in the division’s oilfield technologies jumped roughly 53% year over year in the quarter and around 47% for full-year 2018.

The buyout of Georgia-Pacific’s pine chemicals business also contributed to strong growth in sales and EBITDA of the Performance Chemicals division in the fourth quarter.

Sustained adoption of the company’s solutions geared to meet the U.S. EPA Tier 3 and California LEV III emission regulations is also contributing to the growth in the Performance Materials segment. 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, the recently completed acquisition of the Capa caprolactone business is expected to contribute to the growth of the company’s revenues and earnings in 2019. Capa is a market leader in the manufacture and commercialization of caprolactone and high-value downstream derivatives. The company expects the acquisition to be accretive to its earnings and margins in the first year.

Ingevity Corporation Price and Consensus

 

Ingevity Corporation Price and Consensus | Ingevity Corporation Quote

Stocks Worth a Look

Other top-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, W. R. Grace & Co. GRA and Israel Chemicals Ltd. ICL.

Kirkland Lake Gold has an expected earnings growth rate of 47.2% for the current year and carries a Zacks Rank #1. Its shares have shot up around 120% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

W. R. Grace has an expected earnings growth rate of 10.3% for the current year and carries a Zacks Rank #2 (Buy). Its shares have gained roughly 16% in the past year.

Israel Chemicals has an expected earnings growth rate of 10.8% for the current year and carries a Zacks Rank #2. The company’s shares have rallied around 21% over the past year.  

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