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Univar's (UNVR) Earnings Trounce Estimates in Q1, Sales Lag

Zacks Equity Research

Univar Inc. UNVR slipped to a loss (on a reported basis) of $63.9 million or 43 cents per share in first-quarter 2019, from a profit of $65.4 million or 46 cents a year ago. The bottom line in the reported quarter includes transaction-related fees of $50.1 million, integration-related expenses of $38.1 million and Saccharin legal settlement charges of $62.5 million.

Barring one-time items, earnings came in at 33 cents a share in the quarter, down from 42 cents a year ago. The results topped the Zacks Consensus Estimate of 23 cents.

The chemical maker’s revenues were $2,160 million in the quarter, essentially flat year over year, falling shy of the Zacks Consensus Estimate of $2,248.5 million.

On a constant currency basis, revenues rose around 3% year over year. Gains in the company’s U.S. business was masked by soft Canadian energy sector demand and unfavorable currency impacts.

Univar Inc. Price, Consensus and EPS Surprise

 

Univar Inc. Price, Consensus and EPS Surprise

Univar Inc. price-consensus-eps-surprise-chart | Univar Inc. Quote

Segment Review

Revenues at the USA division increased around 9% year over year on a reported basis to $1,307.2 million in the quarter, driven by the Nexeo acquisition, higher average selling prices and better sales force execution. Gross profit rose around 10% year over year to $307.3 million, helped by favorable product mix.

Revenues at the Canada segment dropped roughly 13% year over year to $273.8 million. Gross profit fell around 14% year over year to $53.5 million in the quarter owing to reduced margins on certain commodity chemicals. The segment faced headwinds from lower demand from the energy sector.

The EMEA segment raked in sales of $483.7 million, down 10% year over year. Gross profit was down 6% year over year to $116.2 million.

Sales from the LATAM unit declined roughly 6% to $95.3 million. Gross profit fell around 9% year over year to $19.4 million. Higher prices and better sales force execution were offset by reduced volumes due to weak economic conditions and certain product shortages.

Balance Sheet

Univar ended the quarter with cash and cash equivalents of $788 million, up nearly seven-fold year over year. Long-term debt was $3,694 million, up around 38% year over year.

Outlook

For 2019, Univar continues to expect adjusted EBITDA of between $740 million and $760 million. The projected figure reflects 10-months earnings from the Nexeo Chemicals business and net realized synergies worth roughly $10 million. The company also expects to generate $300-$350 million in free cash flow in 2019.

Univar also expects adjusted EBITDA of between $195 million and $200 million for the second quarter of 2019, up from $173.1 million it earned a year ago.

Price Performance

Univar’s shares have lost around 16.9% over a year compared with the roughly 29.7% decline recorded by its industry.



 

Zacks Rank and Stocks to Consider

Univar currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the basic materials space include AngloGold Ashanti Limited AU, Flexible Solutions International Inc. FSI and Air Products and Chemicals, Inc. APD.

AngloGold has an expected earnings growth rate of 86.8% for the current year and carries a Zacks Rank #1 (Strong Buy). The company’s shares have shot up around 31% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 171.4% for the current year and carries a Zacks Rank #2 (Buy). Its shares have rallied roughly 106% in the past year.

Air Products has an expected earnings growth rate of 10.3% for the current fiscal year and carries a Zacks Rank #2. Its shares have gained around 23% in the past year.

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