Element Solutions (ESI) Stock Up 52% in 3 Months: Here's Why

Element Solutions (NYSE:ESI) Inc.'s ESI shares have surged 51.8% over the past three months. The rally has resulted in the stock outperforming its industry’s rise of 17.8% over the same time frame.

Element Solutions, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $4.2 billion and average volume of shares traded in the last three months is around 1,847.7K. The company has an expected long-term earnings per share growth rate of 10.4%.

Let’s delve deeper into the factors behind the stock’s price appreciation.

What’s Favoring ESI?

Element Solutions is benefiting from healthy demand in its high-end electronics business and the rebound in the automotive industry. It is witnessing a recovery in its end markets from the coronavirus-induced slowdown.

Element Solutions saw a strong recovery in its automotive and industrially oriented businesses in the third quarter from the second-quarter lows. Its high-end electronics business also continued its momentum in the third quarter, driven by consistent strong demand. Element Solutions believes that it has ample growth opportunities based on the megatrends driving its markets and its ability to outperform its markets through sound strategic execution.

The company recently announced an increase in its financial guidance. It raised its fourth-quarter adjusted EBITDA guidance to roughly $118 million from its prior view of $90-$95 million. The company expects this to translate to adjusted EBITDA of roughly $415 million for 2020. Element Solutions also sees mid-to-high single digit growth in full-year adjusted earnings per share.

Earnings estimates for Element Solutions have also been going up over the past two months. The Zacks Consensus Estimate for the current year has increased 14.3%. The consensus estimate for 2021 has also been revised 15.5% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

Meanwhile, the company is implementing a number of cost-containment measures including reduction of traveling costs. These actions are likely to support its margins in 2020.

Element Solutions should also benefit from the acquisitions of Kester and DMP Corporation. The Kester acquisition has added capabilities and scale to its existing electronics assembly materials business. Moreover, the DMP buyout has expanded Element Solutions’ investment in technology to offer innovative solutions. The company expects these two acquisitions to benefit its net sales by roughly $15 million in the fourth quarter.

Element Solutions Inc Price and Consensus

Element Solutions Inc price-consensus-chart | Element Solutions Inc Quote

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Bunge (NYSE:BG) Limited BG, Impala Platinum (OTC:IMPUY) Holdings Limited IMPUY and BHP Group (NYSE:BHP) BHP.

Bunge has an expected earnings growth rate of 43.5% for the current year. The company’s shares have gained around 15% in the past year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum has an expected earnings growth rate of 131.7% for the current fiscal. The company’s shares have rallied around 26% in the past year. It currently carries a Zacks Rank #1.

BHP Group has a projected earnings growth rate of 32.4% for the current fiscal year. The company’s shares have gained around 19% in a year. It currently carries a Zacks Rank #2.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>