A month has gone by since the last earnings report for Univar (UNVR). Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Univar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Univar’s Earnings Beat, Revenues Miss Estimates in Q3
Univar logged a profit (on a reported basis) of $2.5 million or a penny per share in third-quarter 2019, down 94.9% from a profit of $49.6 million or 35 cents per share a year ago.
Barring one-time items, earnings were 36 cents a share in the quarter, down from 40 cents a year ago. However, the same surpassed the Zacks Consensus Estimate of 35 cents.
The company’s revenues were $2,387.3 million in the quarter, up roughly 12% year over year. However, it lagged the Zacks Consensus Estimate of $2,503.1 million.
On a constant currency basis, revenues rose around 13% year over year. Contribution from the Nexeo buyout and strong performance in the Canada core industrial chemical business were offset by softness in the Canada energy sector and weaker demand for chemicals and ingredients from global industrial end markets.
Revenues at the USA division improved 21.1% year over year on a reported basis to $1,591.6 million in the quarter, driven by the impacts of the Nexeo acquisition. Gross profit rose 26.1% year over year, owing to favorable product and end-market mix.
Revenues at the Canada segment increased 2.9% year over year to $284.7 million. Gross profit rose 14.6% year over year. The segment witnessed strong performance in the industrial chemical business and certain commodity products. This was partly offset by lower volume in the energy sector.
The EMEA segment raked in revenues of $425.6 million, down around 10% year over year. Gross profit was down around 9% year over year.
Revenues from the LATAM unit rose 17.7% to $117.2 million. Gross profit rose 14.3% year over year. The segment gained from the Nexeo acquisition, strong performance in Mexico energy markets and the Brazilian agriculture sector, and cost control actions, partly offset by soft industrial demand in Brazil.
Univar ended the quarter with cash and cash equivalents of $134.6 million, up 56.7% year over year. Long-term debt was $2,977.1 million, up around 17% year over year.
For 2019, Univar revised its adjusted EBITDA forecast, factoring in lower-than-expected demand for chemicals and ingredients. The company now expects adjusted EBITDA of $700-$725 million compared with $725-$740 million mentioned earlier.
Moreover, Univar expects adjusted EBITDA of $155-$180 million for the fourth quarter of 2019, suggesting rise from $144 million earned a year ago.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -20.29% due to these changes.
At this time, Univar has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Univar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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