Ingevity (NGVT) Q4 Earnings Surpass Estimates, Sales Miss

Ingevity Corporation (NYSE:NGVT) reported profits (attributable to stockholders) of $44.3 million or $1.05 per share in fourth-quarter 2019, up 5.2% from $42.1 million or 99 cents per share a year ago.

Adjusted earnings per share for the reported quarter were $1.10, surpassing the Zacks Consensus Estimate of 98 cents per share.

The company’s revenues rose 8.9% year over year to $303.4 million in the quarter. However, the top line lagged the Zacks Consensus Estimate of $304.1 million.

Adjusted EBITDA climbed 24.3% year over year to $91.1 million in the quarter. The chemical maker faced challenges from continued macroeconomic pressure, especially in industrial applications. However, it gained from growth in end-use applications, which were driven by regulation, adoption of technology and spending on infrastructure.

Ingevity Corporation Price, Consensus and EPS Surprise

Segment Review

Revenues from the Performance Chemicals division rose 5.5% year over year to $175.2 million in the quarter under review. The top line was driven by the addition of the engineered polymers product line and strong pavement technology performance.

Revenues from the Performance Materials unit climbed 14% to $128.2 million, powered by automakers’ continued implementation of China 6 gasoline vapor emission control regulations. The top line was also supported by strong gains in sales of the company’s solutions geared to meet the U.S. and Canadian automotive emission standards.

2019 Highlights

For 2019, profit (attributable to stockholders) was $183.7 million or $4.35 per share, up 8.6% from $169.1 million or $3.97 per share recorded in 2018. Revenues went up 14.1% year over year to $1.293 billion.

Balance Sheet

Ingevity ended 2019 with cash and cash equivalents of $56.5 million, down 27.1% year over year. Long-term debt was $1,228.4 million, up 65.7%.

Outlook

Ingevity expects sales for 2020 to be between $1.3 billion and $1.35 billion. It also anticipates adjusted EBITDA for the year to be in the band of $400-$420 million.

Free cash flow for 2020 has been forecast to be in the band of $200-$220 million.

Per the company, the outlook represents little to no improvement in the global macroeconomic climate but anticipates minimal impact (which is yet to be known) from the coronavirus outbreak in China.

The company expects revenues to be flat to down modestly for its Performance Chemicals segment. Engineered polymers and pavement technologies are expected to witness solid growth, which is likely to be offset by ongoing pressure in industrial specialties and oilfield applications.

Ingevity also expects to generate double-digit revenue growth and accretion in adjusted EBITDA margins for its Performance Materials unit.

Price Performance

Shares of Ingevity have lost 34.6% in the past year against the industry’s growth of 5.6%.

Zacks Rank & Stocks to Consider

Ingevity currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp. (NYSE:DQ) , Royal Gold, Inc. (NASDAQ:RGLD) and Commercial Metals Company (NYSE:CMC) .

Daqo New Energy has a projected earnings growth rate of 326.3% for 2020. The company’s shares have rallied 51.3% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Gold has an estimated earnings growth rate of 83.5% for fiscal 2020. It currently flaunts a Zacks Rank #1. Its shares have rallied 28.4% in a year.

Commercial Metals has a Zacks Rank #2 (Buy) and a projected earnings growth rate of 20.2% for 2020. The company’s shares have rallied 16.4% in a year.

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