Univar Inc.’s UNVR stock looks promising at the moment. The chemical maker’s shares are up around 13% over the past six months. Forecast-topping earnings performance in the first quarter and buoyant prospects from the Nexeo acquisition have contributed to the gain.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Let's take a look into the factors that make this Zacks Rank #1 (Strong Buy) stock an attractive investment option at the moment.
Univar has significantly outperformed the industry it belongs to year to date. The company’s shares have shot up 21.9% compared with roughly 19% decline recorded by the industry. The company has also outpaced the S&P 500’s gain of roughly 15% for the same period.
Estimates Going Up
Annual estimates for Univar have moved north over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2019 has increased by around 11.7%. The Zacks Consensus Estimate for 2020 has also moved up roughly 9.2% over the same timeframe.
Superior Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Univar is 16.4%, above the industry’s level of 11.5%.
Univar, last month, said that it 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.
For 2019, Univar continues to expect adjusted EBITDA of between $740 million and $760 million, reflecting an increase from $640 million a year ago. 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.
Growth Drivers in Place
Univar is well placed to gain from synergies of the Nexeo buyout in 2019. The combination is expected to drive growth and boost shareholders’ value with the largest sales force in North America along with extended product offering and most efficient supply chain network in the industry. The acquisition is expected to deliver $100 million of annual run rate cost savings by the third year following its closure. The company expects around $10 million net realized synergies in 2019.
The company also remains committed to grow its core business and improve sales force execution to deliver sustained growth in gross profit margins. Improved sales force execution contributed to an expansion in gross margin in the first quarter.
Moreover, Univar remains focused on cost-cutting, expense management and productivity actions, which is helping it to minimize operational costs and boost margins. The company is also gaining from its strategic initiatives, efficiency gains and prudent investments to drive growth.
Univar Inc. Price and Consensus
Univar Inc. price-consensus-chart | Univar Inc. Quote
Other Stocks Worth a Look
Other stocks worth considering in the basic materials space include Materion Corporation MTRN, Flexible Solutions International Inc FSI and AngloGold Ashanti Limited AU.
Materion has an expected earnings growth rate of 27.3% for the current year and carries a Zacks Rank #1. The company’s shares have gained around 12% 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 342.9% for the current year and carries a Zacks Rank #1. The company’s shares have surged 127% in a year’s time.
AngloGold Ashanti has an expected earnings growth rate of 90.6% for the current year and carries a Zacks Rank #1. Its shares have gained around 67% in the past year.
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