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Why Is Milacron Holdings (MCRN) Down 17.2% Since Last Earnings Report?

Zacks Equity Research
In the latest trading session, Construction Partners (ROAD) closed at $13.75, marking a +0.22% move from the previous day.

It has been about a month since the last earnings report for Milacron Holdings (MCRN). Shares have lost about 17.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Milacron Holdings 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 catalysts.

Milacron's Q1 Earnings Beat, Revenues Miss Estimates

Milacron Holdings delivered adjusted earnings per share of 27 cents in the first quarter, surpassing the Zacks Consensus Estimate of 26 cents. On a year-over-year basis, earnings plunged 30.8%.

Including one-time items, the company reported earnings per share of 13 cents in the reported quarter, jumping 44.4% from the year-ago quarter’s reported figure of 9 cents.

Operational Update

Milacron’s revenues fell 13.9% year over year to $248.7 million during the first quarter. Revenues also missed the Zacks Consensus Estimate of $280 million. Excluding unfavorable impact of currency movements, organic revenues decreased 10.5% from the prior-year quarter’s reported tally. New orders in the reported quarter declined 10.8% year over year to $275.3 million.

Cost of sales during the January-March quarter went down 13.2% year over year to $164 million. Gross profit decreased 15% year over year to $84.8 million. Gross margin came in at 34.1% during the first quarter compared with the year-ago quarter’s 34.6%.

Selling, general and administrative expenses slipped 13% year over year to $54 million. Adjusted EBITDA went down 23.5% to $41.0 million in the first quarter from $53.6 million in the prior-year quarter. Adjusted EBITDA margin shrunk 210 bps to 16.5% in the quarter.

Segmental Results

Advanced Plastic Processing Technologies: Net sales declined 15% year over year to $119.4 million. Excluding $3.8 million of unfavorable impact of currency movements, sales dropped 12.2% from the prior-year quarter. Adjusted EBITDA was down 9.3% year over year to $14.7 million.
 
Melt Delivery and Control Systems: Net sales dipped 14% year over year to $100 million. Excluding unfavorable impact of currency movements of $4.6 million, sales decreased 10.2% from the prior-year period. Adjusted EBITDA plummeted 32.5% year over year to $25.8 million.
 
Fluid Technologies: Sales for the reported quarter slipped 8.4% year over year to $29.3 million. Sales dipped 3.8% from the year-ago period, excluding $1.5 million of unfavorable currency-movement impact. Adjusted EBITDA was $6.4 million, down from the prior year’s $7.1 million.

Financial Update

Milacron reported cash and cash equivalents of $150 million at the end of the first quarter, down from $184 million witnessed at the end of 2018. Net cash used in operating activities were $4.6 million during the three-month period ended Mar 31, 2019, compared with cash inflow of $11.7 million reported in the comparable period last year.  Long-term debt was $824 million as of Mar 31, 2019, compared with $829 million as of Dec 31, 2018
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Milacron Holdings has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Milacron Holdings has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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